Roth IRA
Also called: Roth individual retirement account
A Roth IRA is an individual retirement account funded with money you have already paid tax on. Contributions aren’t deductible, but qualified withdrawals, including the investment earnings, are tax-free.
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How it works
You open a Roth IRA yourself at a financial institution and choose the investments inside it. For 2026, you can contribute up to $7,500, or $8,600 if you are 50 or older, but that limit covers all of your traditional and Roth IRAs combined, and contributions can’t exceed your taxable compensation for the year (on a joint return, a spouse’s compensation can count). There is no age limit on contributing, and having a workplace plan doesn’t stop you from opening one.
Income limits also apply. Depending on your filing status and income, the amount you can contribute directly may be reduced or eliminated, and the IRS publishes the income ranges for each tax year. It is worth checking the current figures before contributing, especially if your income is close to the range or changes during the year.
The tax benefit arrives at the end. Withdrawals that meet the IRS requirements for a qualified distribution are tax-free, while withdrawals that don’t qualify are treated differently, so the rules are worth reading before taking money out early. A Roth IRA also doesn’t require you to start withdrawing at a set age during your lifetime.
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Sources and further reading
Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.