Financial experts tout that the key to building a strong retirement nest egg is to know your investment options. Yet according to a Fidelity Investments study, many Americans are scratching their heads over a Roth IRA.

While 56% of the study’s participants report that they understood the benefits of a Roth IRA (an individual retirement account), the study proves otherwise. For example, about 30% of investors incorrectly answered that contributions to the accounts are tax deductible, 20% didn’t realize that investment gains and income were tax free and 32% didn’t know that the income from the account could be withdrawn tax free after age 59 ½.

Moreover, 57% of participants were unaware that funds from a Roth IRA could apply to a first-time home purchase, while 67% didn’t know that the account could be used to pay for college tuition.

Starting in 2010, the $100,000 income restriction for converting a traditional IRA or 401(k) assets to a Roth IRA will no longer apply. The survey shows, however, that 88% of participants were unaware of investment opportunities under the 2010 Roth IRA conversion process.

“This survey highlights that many investors first need to understand the benefits of a Roth IRA before they can consider if a conversion is right for them,” says Chris McDermott, vice president of Fidelity Investments. “It also reinforces how important investor education will be in helping individuals to evaluate their specific needs around this complex decision,” he adds.

The survey results are based on responses from 800 retirement plan owners, only half had household incomes of $100,000 or more, while the other half had household incomes of less than $100,000, reports Fidelity.

Other highlights from the study included:

• Approximately one third of investors indicate they do not understand a Roth IRA conversion’s tax implications (34%) or the tax structure of a Roth IRA itself (30%).

• Nearly 30% of respondents say their balances are too small for a conversion or they lack sufficient funds to cover the conversion tax costs (27%).

• One in five (20%) do not believe a Roth IRA fits their needs; These barriers may be contributing to current intention rates, as only 7% of investors surveyed say they plan to convert to a Roth IRA now.