What Is a Roth IRA?

A Roth IRA is an individual retirement account you fund with after-tax dollars: you get no tax deduction today, but in retirement your qualified withdrawals — both what you contributed and everything it earned — come out completely tax-free. For 2026 you can contribute up to $7,500 ($8,600 if you’re 50 or older), as long as your income is under the limit. Created by the Taxpayer Relief Act of 1997 (IRC §408A), it’s essentially a bet that paying tax now beats paying it later.

How a Roth IRA works

A Roth IRA isn’t an investment itself — it’s a tax wrapper you hold investments inside (index funds, ETFs, stocks, bonds). What makes it a Roth is the tax treatment, which runs in three steps:

• Money goes in after tax. You contribute dollars you’ve already paid income tax on, so there’s no deduction in the year you contribute.
• It grows tax-free. Dividends, interest, and capital gains inside the account are never taxed year to year.
• Qualified withdrawals come out tax-free. Once you meet the rules (below), everything you take out — contributions and all the growth — is free of federal income tax.

That’s the opposite of a traditional IRA, where you typically deduct contributions now and pay ordinary income tax on every dollar you withdraw later. In one line: a Roth has you pay tax on the seed, not the harvest.

What are the benefits of a Roth IRA?

• Tax-free growth and withdrawals. Decades of compounding come out untaxed in retirement — the headline advantage.
• No required minimum distributions for the owner. A traditional IRA forces withdrawals starting at age 73 (or 75); a Roth IRA never does during your lifetime (IRC §408A(c)(5)), so it can keep growing or pass to heirs intact.
• Your contributions stay accessible. Because you already paid tax on them, you can withdraw your contributions at any time, tax- and penalty-free — a built-in flexibility most retirement accounts don’t offer.
• Tax diversification. Having tax-free money alongside pre-tax savings gives you control over your taxable income in retirement.
• It can contribute at any age. There’s no upper age limit — even a working teenager with earned income can have one (a custodial Roth IRA).

Who can open a Roth IRA? (2026 income limits)

Two conditions: you need earned income (wages, salary, or self-employment income — per IRC §219(f)(1); investment income, Social Security, and pensions don’t count), and your modified adjusted gross income (MAGI) must be under the phase-out range for your filing status. For 2026:

Below the lower number you can contribute the full amount; within the range your limit phases down; at or above the top you can’t contribute directly. Over the limit? The backdoor Roth has no income ceiling. Not sure where you land — the MAGI estimator and the eligibility page work it out.

How much can you contribute in 2026?

The 2026 limit is $7,500 if you’re under 50, or $8,600 if you’re 50 or older (the standard $7,500 plus a $1,100 catch-up), per IRS Notice 2025-67. Two things to know:

• It’s a combined limit. The cap applies across all your IRAs — you can’t put $7,500 in a Roth and $7,500 in a traditional IRA.
• You can’t contribute more than you earned. If your earned income for the year is below the limit, your contribution is capped at what you earned.

You have until the federal tax-filing deadline — around April 15, 2027 — to make a 2026 contribution. The full history and catch-up details are on contribution limits.

How do you open a Roth IRA?

Opening one takes about 15 minutes at any major brokerage. The steps:

• Choose a provider — any major brokerage offers Roth IRAs (typically with no account fee and a wide fund selection).
• Open the account and link your bank.
• Contribute up to the annual limit, in a lump sum or automatic monthly transfers.
• Actually invest it. This is the step beginners miss: cash sitting in the account doesn’t grow — you have to buy something inside it (a low-cost index fund or ETF, for example).

A from-scratch walkthrough is on Roth IRA for beginners.

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

Think of a Roth in two buckets:

• Your contributions — the money you put in — can be withdrawn anytime, at any age, tax- and penalty-free. You already paid tax on it.
• Your earnings — the growth — come out tax-free only in a qualified distribution (IRC §408A(d)(2)): the account must be at least five years old AND you must be 59½ (or disabled, or the withdrawal is for a first-time home purchase up to $10,000, or it’s paid to a beneficiary after death). Pull earnings early without an exception and that portion is taxed plus a 10% penalty.

So a Roth is far more flexible than “locked until retirement” — your own contributions are always within reach. Full detail on withdrawal rules and the 5-year rule.

Roth IRA vs. traditional IRA

The core difference is when you pay tax:

It comes down to a bet on your future tax rate: choose Roth if you expect to be in the same or a higher bracket later, traditional if you expect a lower one. For the full side-by-side — RMDs, the income rules, and how to use both — see our Roth IRA vs. Traditional IRA comparison, and the Roth vs. Traditional calculator runs the numbers for your situation.

Is a Roth IRA right for you?

A Roth IRA tends to be the strongest fit if you:

• Expect your tax rate in retirement to be the same or higher than it is now (common for younger savers with decades of growth ahead);
• Want flexibility — the ability to reach your contributions in a pinch;
• Want to avoid forced withdrawals (RMDs) and potentially leave tax-free money to heirs.

Even high earners over the income limit can usually get money into a Roth through the backdoor Roth. For the complete rulebook — contributions, conversions, withdrawals, and RMDs in one place — see Roth IRA Rules.