What is Roth IRA?

A <a href="/calculators/ira" class="text-emerald-600 dark:text-emerald-400 hover:text-emerald-700 dark:hover:text-emerald-300 hover:underline font-semibold transition-colors duration-200">Roth IRA</a> is an individual retirement account that allows savers to make contributions with after-tax dollars in exchange for tax-free growth and tax-free distributions in retirement. Unlike a Traditional IRA, contributions to a Roth IRA do not provide an immediate tax deduction. However, because taxes are paid upfront, the balance inside the account compounds entirely tax-free, and qualified distributions of both the original contributions and any investment earnings are 100% tax-free once the account owner reaches age 59½ and has held the account for at least five years.

Direct contributions to a Roth IRA are subject to income limits regulated by Modified Adjusted Gross Income (MAGI) phase-outs. For the 2026 tax year, the contribution phase-out range is $153,000 to $168,000 for single filers and heads of household, and $242,000 to $252,000 for married couples filing jointly. High-earning individuals whose MAGI exceeds these limits are prohibited from contributing directly to a Roth IRA, but they can circumvent this rule by utilizing the '<a href="/articles/backdoor-roth-ira-pro-rata-conversion-rules" class="text-emerald-600 dark:text-emerald-400 hover:text-emerald-700 dark:hover:text-emerald-300 hover:underline font-semibold transition-colors duration-200">backdoor Roth IRA</a>' strategy: contributing to a non-deductible Traditional IRA and subsequently converting it to a Roth IRA, subject to IRS pro-rata taxation rules.

Roth IRAs offer unique flexibility compared to other retirement accounts. Since contributions are made with after-tax dollars, the principal contribution amount (but not the earnings) can be withdrawn at any time, for any reason, without taxes or penalties. Additionally, Roth IRAs are exempt from Required Minimum Distributions (RMDs) during the original owner's lifetime. This allows the assets to grow unchecked throughout the owner's life and be passed down to heirs as a highly tax-efficient legacy, although under the SECURE Act of 2019, most non-spouse beneficiaries must fully distribute the inherited account within ten years.