A Roth IRA is a type of individual retirement account (IRA) in the United States where you contribute money that has already been taxed (after-tax dollars). The main advantage is that the money you contribute and the earnings on those contributions grow tax-free and can be withdrawn tax-free in retirement, provided certain conditions are met-specifically, you must be at least 59½ years old and have had the account open for at least five years
. Unlike traditional IRAs, contributions to a Roth IRA are not tax-deductible when made, but qualified withdrawals (both contributions and earnings) are tax-free. You can also withdraw your contributions (not earnings) at any time without taxes or penalties. Roth IRAs have income limits for eligibility and annual contribution limits, which for 2024 and 2025 are $7,000 (with an additional $1,000 catch-up contribution allowed if you are age 50 or older)
. Roth IRAs offer flexibility with fewer restrictions on investments compared to other retirement plans and do not require minimum distributions during the account holder's lifetime, allowing the account to grow tax-free for longer
. In summary, a Roth IRA is a retirement savings account that lets you pay taxes now on your contributions so that you can enjoy tax-free growth and tax- free withdrawals in retirement, making it especially beneficial if you expect to be in a higher tax bracket later in life
