Roth IRA

A Roth IRA is a US individual retirement account in which you contribute money that has already been taxed, and in return qualified withdrawals, including all the investment growth, come out tax-free. There is no upfront deduction, unlike a traditional IRA. The trade-off favors people who expect their tax rate in retirement to be the same or higher than it is today, and the account's tax-free growth makes it a powerful long-term vehicle.

How it works (2026 figures)

• Contribution limit. $7,500 for 2026, plus a $1,100 catch-up for people age 50 or older. The limit is shared across all of a person's traditional and Roth IRAs, and contributions cannot exceed earned income for the year.
• Income limits. The amount you may contribute phases out at modified adjusted gross income of $153,000–$168,000 for single filers and $242,000–$252,000 for married couples filing jointly.
• Qualified withdrawals. Earnings come out tax- and penalty-free if the account has met a five-year holding period and you are 59½ or older, disabled, a beneficiary, or using up to $10,000 for a first home.
• Contributions themselves can be withdrawn at any time without tax or penalty, because they were taxed already.
• No required minimum distributions for the original owner during their lifetime.

Things to know

• Conversions. You can convert traditional IRA money to a Roth by paying income tax on the converted amount. Each conversion starts its own five-year clock for the 10% early-withdrawal penalty. People above the income limits sometimes use this route, called a backdoor Roth.
• Early withdrawals of earnings that do not qualify are generally taxed and may face a 10% additional tax.
• Roth 401(k)s follow similar tax logic inside an employer plan, with much higher contribution limits.

Related terms

• Individual retirement account (IRA)
• 401(k) plan
• Compound Interest
• Capital gain
• Holding period
• Longer guide: Roth vs traditional IRA: how to compare tax now and tax later