Roth IRA

A tax-advantaged retirement account where contributions are made with after-tax dollars but all qualified withdrawals in retirement are completely tax-free.

A Roth IRA is one of the most powerful retirement savings vehicles available in the US. You pay taxes on money going in, but all growth and withdrawals in retirement are tax-free — potentially saving tens of thousands in taxes.

Key Rules (2026)

  • **Contribution limit**: $7,000/year ($8,000 if age 50+)
  • **Income limits**: Single filers earning under $161,000 (full contribution); phase-out up to $176,000
  • **No required minimum distributions**: Unlike traditional IRAs, you're never forced to withdraw
  • **Penalty-free contribution withdrawal**: You can withdraw contributions (not earnings) anytime

Roth IRA vs Traditional IRA

  • Roth: Pay taxes now, tax-free in retirement — best if you expect higher future tax rates
  • Traditional: Tax deduction now, pay taxes on withdrawals — best if you expect lower future tax rates

FAQ

Who should open a Roth IRA?

Anyone who expects to be in an equal or higher tax bracket in retirement. It's especially valuable for young earners whose investments have decades to grow tax-free.

Can I have both a 401k and a Roth IRA?

Yes. Many financial advisors recommend maximizing your employer's 401k match first, then contributing to a Roth IRA for tax diversification in retirement.