Roth IRA
A retirement account funded with after-tax dollars. Qualified withdrawals in retirement — including all growth — are completely tax-free. The 2025 contribution limit is $7,000 ($8,000 if 50+).
A Roth IRA is a retirement savings account funded with after-tax dollars. Unlike a Traditional IRA, you do not receive a tax deduction for contributions. However, all qualified withdrawals in retirement — including decades of investment growth — are entirely tax-free.
For 2025, you can contribute up to $7,000 ($8,000 if age 50 or older), but eligibility phases out based on income. Single filers can make full contributions with modified AGI below $150,000, with a phase-out up to $165,000. For married filing jointly, the phase-out range is $236,000 to $246,000.
Roth IRAs have several unique advantages. Contributions (but not earnings) can be withdrawn at any time without tax or penalty, providing a financial safety net. There are no Required Minimum Distributions during the owner's lifetime, making Roth IRAs excellent estate planning tools. A Roth is generally more beneficial if you expect your tax rate to be higher in retirement than it is now.
Related Terms
Traditional IRA
An individual retirement account where contributions may be tax-deductible and investments grow tax-deferred. The 2025 contribution limit is $7,000 ($8,000 if age 50+).
401(k)
An employer-sponsored retirement savings plan that lets you contribute pre-tax income (or after-tax with Roth 401(k)). The 2025 employee contribution limit is $23,500.
Adjusted Gross Income (AGI)
Your gross income minus specific adjustments such as student loan interest, IRA contributions, and self-employment tax. AGI is the starting point for calculating your taxable income.
Tax Bracket
A range of income taxed at a specific rate. The US uses a progressive system with seven brackets ranging from 10% to 37% for 2025.
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