What Is a Roth IRA?

A Roth IRA is an individual retirement account whose regular contributions are not tax-deductible. In exchange, qualified withdrawals are free of federal income tax. For 2026, the general regular-contribution limit is $7,500, or $8,600 if you are 50 or older by year-end, shared with your Traditional IRAs. Your allowed amount also depends on qualifying compensation and income eligibility. Created by the Taxpayer Relief Act of 1997 (IRC §408A), a Roth separates the account’s tax treatment from the investments you choose inside it.

How a Roth IRA works

A Roth IRA is an account that holds investments, not an investment itself. Think of it as the container; the cash, funds, stocks or bonds inside are its contents. The main tax rules work like this:

• No deduction for regular contributions. Putting money in a Roth IRA does not reduce your taxable income. “After-tax” does not mean you must actually owe income tax that year.
• No annual federal tax on ordinary investment earnings inside the account. You generally do not report its interest, dividends or investment gains on your annual return. The investments can still lose value.
• Qualified withdrawals are free of federal income tax. The withdrawal rules below determine when earnings receive that treatment.

A Traditional IRA takes a different approach: contributions may be deductible, and withdrawals of pretax money and earnings are generally taxable. Nondeductible contributions create after-tax “basis” that is not taxed again. It is not automatically tax on every dollar withdrawn.

What are the benefits of a Roth IRA?

• Tax-free qualified withdrawals. Meeting the qualification rules lets you withdraw earnings free of federal income tax.
• No lifetime required minimum distributions (RMDs) for the original owner. You can leave money in your own Roth IRA during your lifetime. Beneficiaries have different withdrawal rules after your death.
• Access to regular contributions. The tax ordering rules let you take out your remaining regular contributions before conversions or earnings, free of federal income tax and the early-distribution tax. Taking money out ordinarily does not restore your annual contribution room.
• More than one tax treatment for retirement savings. Having Roth money alongside pretax savings can give you options when deciding which account to withdraw from.
• No upper age limit for regular contributions. You still need qualifying compensation and must meet the income rules. A teenager with qualifying earnings can also use a custodial Roth IRA.

How common are these accounts? ICI estimates that 37.5 million US households, or 27.8%, owned a Roth IRA in mid-2025. For tax year 2024, 42% of Roth-owning households reported a Roth contribution, versus 23% of Traditional-owning households reporting a Traditional contribution. That measures participation in each account type, not which group saved more overall. Our ICI household-data explainer sets out the dates, populations and limitations.

Who can contribute to a Roth IRA? (2026 income limits)

For a regular contribution, you generally need qualifying compensation and Roth-specific modified adjusted gross income (MAGI) below the upper limit for your filing status. Compensation usually means pay from work, such as wages or adjusted net self-employment earnings. Special qualifying categories include nontaxable combat pay and certain taxable graduate or postdoctoral stipends. Ordinary investment income, pensions and Social Security do not qualify.

If you file jointly, a spouse with little or no compensation may qualify using the couple’s combined compensation under the spousal IRA rules. Each spouse still has a separate IRA and individual annual limit.

Within the phase-out band, use the IRS worksheet to calculate the allowed amount; at or above the upper limit, no direct contribution is allowed. A lower income does not remove the compensation or shared-limit requirements. The MAGI estimator and eligibility guide explain the steps.

Being over the income limit does not require you to close a Roth you already own. Roth conversions have no income ceiling, but the backdoor Roth approach has contribution, tax and reporting rules of its own. Existing pretax Traditional, SEP or SIMPLE IRA balances can make the conversion partly taxable.

How much can you contribute in 2026?

The general limit for regular IRA contributions is $7,500, or $8,600 if you are 50 or older by December 31, 2026. That is $7,500 plus a $1,100 catch-up, confirmed in IRS Notice 2025-67.

• Share the limit across your Traditional and Roth IRAs. Opening more accounts does not multiply it. Conversions and eligible IRA or workplace-plan rollovers do not use this regular-contribution cap. 529-to-Roth rollovers are different: they use the beneficiary’s available annual IRA contribution room.
• Check compensation and MAGI too. Your personal maximum may be lower. Spousal IRA rules can help when one spouse has little or no compensation.

The usual deadline is the due date for that year’s federal return, not including an ordinary filing extension—generally April 15, 2027 for 2026 contributions, subject to applicable IRS relief. Tell the provider which tax year your contribution is for. See contribution limits for the complete calculation.

How do you open a Roth IRA?

1. Compare providers. Check their investment choices, fees, cash arrangements and minimums. Banks and brokerages can offer different types of IRA holdings.
2. Open an account designated as a Roth IRA. Complete the provider’s identity and beneficiary steps, and choose how to fund it.
3. Confirm your contribution amount and tax year. A one-time transfer and automatic contributions count toward the same personal limit.
4. Choose what the money holds. Depositing money and placing an investment order may be separate steps. Cash may earn interest, but it is not automatically invested in a stock or bond fund. Check what your provider actually does with a deposit.

For a fuller walkthrough, see Roth IRA for beginners. Choose investments for your time horizon and comfort with risk; the account label does not make an investment safe.

When can you withdraw money? (the tax-free rules)

For an ordinary withdrawal from your own Roth IRAs, the IRS ordering rules use three layers across your accounts:

1. Remaining regular contributions come out first. They are free of federal income tax and the 10% early-distribution tax. Keep records of contributions and prior withdrawals; this is not unlimited access to the entire balance.
2. Conversions and certain rollover amounts come next, oldest first. Before age 59½, withdrawing amounts that were taxable when converted can trigger the 10% additional tax within a separate five-tax-year period, unless an exception applies.
3. Earnings come out last. They are free of federal income tax in a qualified distribution. Otherwise, earnings are generally taxable, and the 10% additional tax may apply before age 59½ unless an exception applies.

A qualified distribution requires the five-tax-year period beginning January 1 of the first tax year for which you funded any Roth IRA for your benefit, plus one qualifying event: reaching age 59½, qualifying disability, payment after your death, or a qualifying first-home distribution within the $10,000 lifetime limit. Merely opening an unfunded account does not start the clock. A penalty exception by itself does not make earnings income-tax-free.

These are the ordinary owner rules. Inherited accounts and corrective distributions have additional rules. See withdrawal rules, the five-year rule and inherited Roth IRAs.

Roth IRA vs. Traditional IRA

The main difference is when tax is paid, but a fair comparison also counts the tax deduction, if available.

In a simplified comparison with the same pretax saving budget, investment returns and contribution/withdrawal tax rate, a fully deductible Traditional IRA and a qualified Roth withdrawal produce the same after-tax result. Equal rates do not automatically make Roth better. A higher future withdrawal tax rate favors Roth in that model; a lower rate favors deductible Traditional. Real choices also involve deduction eligibility, contribution caps, cash needs and other income.

See the Roth versus Traditional comparison and its calculator for the assumptions behind the arithmetic.

Is a Roth IRA right for you?

Start with three questions: Can you contribute? Which tax treatment fits your circumstances? And can you leave enough money for current expenses and emergencies outside retirement accounts?

A Roth can be useful when paying tax now is attractive, when you value access to remaining regular contributions, or when avoiding lifetime owner RMDs matters. None of those makes it the best choice for everyone. Beneficiaries must still follow inherited-account rules, and a backdoor Roth is not a promise of a tax-free conversion.

You do not have to learn every exception on day one. The Roth IRA rules guide connects the contribution, conversion and withdrawal rules when you need the next level of detail.

Sources

• IRS Notice 2025-67: 2026 regular IRA limits, catch-up and Roth income bands.
• IRS Publication 590-A (2025), chapters 1 and 2: compensation, spousal contributions, eligibility, deadlines, deductions and conversions. The 2026 dollar figures above come from Notice 2025-67, not its 2025 examples.
• IRS Publication 590-B (2025), chapters 1 and 2: after-tax basis, withdrawal ordering, qualified distributions, additional tax and owner/beneficiary rules.
• ICI report and supplemental tables, published June 2026: mid-2025 household ownership and tax-year-2024 contribution participation.

Corrections and updates

Correction · September 27, 2026. Removed an unsupported claim that the ICI contribution survey identifies more active savers overall. Corrected eligibility wording for married people filing separately and spousal contributions; distinguished regular contributions, conversions and earnings; corrected the five-tax-year clock and Traditional IRA after-tax basis; and removed the claim that equal tax rates automatically favor Roth. Also clarified federal-tax scope, contribution deadlines, cash holdings and inherited-account limits. Correction record.