Glossary
Roth IRA
An individual retirement account funded with after-tax money whose qualified withdrawals — contributions and earnings — are tax-free.
A Roth IRA is an individual retirement account funded with money you’ve already paid taxes on — and that’s the last tax it ever owes. Qualified withdrawals after age 59½ (with the account open five years) are entirely tax-free: contributions, decades of growth, all of it.
Its distinctive features go beyond the tax treatment. Direct contributions can be withdrawn at any age, tax- and penalty-free, making a funded Roth a legitimate deep-reserve behind an emergency fund. There are no required minimum distributions during the owner’s lifetime, so the account can compound untouched as long as you live — a estate-planning feature the traditional IRA lacks. And tax-free means certain: whatever tax rates look like in 2055, they don’t apply to this account.
The constraints: an annual contribution limit shared with traditional IRAs (IRS-adjusted most years, catch-up from age 50), an income phase-out above which direct contributions are barred (conversions remain legal — the “backdoor” route), and the requirement of earned income to contribute at all.
The value of the tax-free label is quantifiable — for a typical career of contributions it reaches six figures. Put your own numbers on it with the Roth IRA calculator.
Related calculators
- Roth IRA CalculatorProject your Roth IRA balance and see how much tax you avoid with tax-free growth compared with a taxable account. Instant, free, accurate.
- 401(k) CalculatorProject your 401(k) balance at retirement with employer matching and annual raises — and see exactly what the match adds over your career.