Roth IRA

A Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. It's named after Senator William Roth who championed its creation in 1997.

The Roth Advantage:

• Tax-free growth: No taxes on dividends, interest, or capital gains
• Tax-free withdrawals: Qualified distributions are 100% tax-free
• No RMDs: Unlike Traditional IRAs, no required distributions ever
• Contribution flexibility: Withdraw contributions (not earnings) anytime

2026 Limits:

• Contribution: $7,500 ($8,500 if 50+)
• Income limit (single): $165,000
• Income limit (married): $246,000

Qualification Rules:

• Must have earned income
• Account open 5+ years for tax-free earnings withdrawal
• Age 59½+ for penalty-free earnings withdrawal

Roth IRA vs. Traditional IRA:

Factor	Roth IRA	Traditional IRA
Tax on contributions	Taxed	Deductible
Tax on growth	Tax-free	Tax-deferred
Tax on withdrawal	Tax-free	Taxed
RMDs	None	Age 73
Early withdrawal	Contributions OK	10% penalty

When Roth Makes Sense:

• You expect higher tax rates in retirement
• You're young (more time for tax-free growth)
• You want flexibility and no RMDs
• You've maxed out your 401(k)

Backdoor Roth: High earners can contribute via Traditional IRA conversion.