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Roth IRA

Plain English

A retirement account funded with after-tax money, where qualified withdrawals in retirement are generally tax-free.

Professional definition

An individual retirement account funded with after-tax contributions, subject to IRS income and contribution limits, where qualified distributions of both contributions and earnings are generally exempt from federal income tax.

Example

Contributing $6,000 of after-tax income to a Roth IRA means that amount, and its qualified growth, can generally be withdrawn tax-free in retirement, subject to IRS rules.

Common misconception

Roth IRA eligibility and contribution limits are subject to annual IRS limits and income phase-outs, which change and should be confirmed against current IRS guidance.

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