What is a Roth IRA?

A Roth IRA is an individual retirement account funded with after-tax dollars. Qualified withdrawals in retirement — including earnings — are completely tax-free, and there are no required minimum distributions during the owner's lifetime.

A Roth IRA lets you invest money you've already paid taxes on. Because the tax is settled upfront, the IRS generally doesn't tax the account again — not on growth, not on qualified withdrawals in retirement.

How a Roth IRA is taxed

Contributions: Made with after-tax dollars — not deductible on your return.
Growth: Earnings accumulate tax-free inside the account.
Qualified withdrawals: Tax-free and penalty-free after age 59½, provided the account has been open at least 5 years.
No required minimum distributions (RMDs): Unlike a traditional IRA, the original owner is never forced to take distributions.

Contribution limits

The IRS sets the annual IRA contribution limit each year (it adjusts for inflation), with an additional catch-up amount for savers age 50 and older. You can only contribute up to your earned income for the year. Check the current figures on the IRS IRA contribution limits page.

Who can contribute

Roth IRA eligibility phases out at higher incomes based on your modified adjusted gross income (MAGI) and filing status; above the top of the range, direct contributions aren't permitted. The IRS publishes the current phase-out ranges annually.

Key Roth IRA facts

Roth IRA contributions are not deductible; qualified distributions (including earnings) are not included in gross income. — IRS — Roth IRAs
The IRS sets the annual IRA contribution limit (with a catch-up amount for those 50+); it adjusts for inflation. — IRS — IRA Contribution Limits
Roth IRA owners are not required to take minimum distributions during their lifetime — a key difference from traditional IRAs. — IRS — Traditional and Roth IRAs

Key takeaways

Roth IRA contributions use after-tax money; qualified withdrawals in retirement are tax-free.
No required minimum distributions during the original owner's lifetime.
Contribution limits and income phase-outs are set annually by the IRS.
This page is informational only — consult a qualified tax professional before making retirement-account decisions.