Roth IRA
A retirement account funded with after-tax dollars that grows tax-free, with tax-free withdrawals in retirement.
What You Need to Know
A Roth IRA is one of the best retirement accounts available. You contribute money you've already paid taxes on, but it grows completely tax-free, and you pay ZERO taxes when you withdraw in retirement.
2025 Contribution Limits:
- Under 50: $7,000/year
- 50+: $8,000/year
Income Limits (2025): Roth IRA contributions phase out if you earn more than:
- Single: $146,000-$161,000
- Married: $230,000-$240,000
Major Advantage: You can withdraw your contributions (not earnings) anytime without penalty. This makes it a flexible emergency fund alternative.
Roth vs. Traditional IRA: Choose Roth if you expect to be in a higher tax bracket in retirement. Choose Traditional for immediate tax deduction.
Sources & References
This information is sourced from authoritative government and academic institutions:
- irs.gov
https://www.irs.gov/retirement-plans/roth-iras
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Related Terms in Retirement Planning
401(k)
An employer-sponsored retirement account where you contribute pre-tax income, often with employer matching.
Backdoor Roth IRA
A legal strategy allowing high earners to contribute to a Roth IRA by converting a Traditional IRA contribution.
Employer Match
Free money from your employer when you contribute to a 401(k) or similar retirement plan, typically matching 3-6% of your salary.
FIRE (Financial Independence, Retire Early)
A movement focused on saving aggressively (50-70% of income) to retire decades earlier than traditional retirement age.
Pre-Tax (Before Tax)
Income or contributions made before taxes are withheld, reducing current taxable income.
QCD (Qualified Charitable Distribution)
A tax-free donation of up to $105,000 per year directly from your IRA to charity, available to those age 70½ and older, that counts toward your RMD.