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 Contributions (but not earnings) can be withdrawn at any time without tax or penalty, providing a financial safety net.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.
How it works
A Roth IRA is funded with money you've already paid tax on, so unlike a Traditional IRA there's no upfront deduction. In exchange, qualified withdrawals in retirement — both your original contributions and every dollar of investment growth on top — come out completely tax-free. For 2025, the contribution limit is the same as a Traditional IRA: $7,000, or $8,000 if you're 50 or older, shared across both account types combined.
You open and fund a Roth IRA directly with a brokerage, and eligibility to contribute phases out based on income rather than workplace-plan coverage: for 2025, single filers phase out between $150,000 and $165,000 of modified AGI, and married filing jointly between $236,000 and $246,000. High earners who exceed these limits sometimes use a "backdoor Roth" — contributing to a nondeductible Traditional IRA, then converting it — to get money into a Roth despite the income limit.
Because contributions were already taxed, you can withdraw your original contribution amounts at any time, for any reason, without tax or penalty — only the earnings portion is restricted until you're 59½ and the account has been open five years. Roth IRAs have no Required Minimum Distributions during the original owner's lifetime, unlike Traditional IRAs, which makes them attractive both for people who don't need the money in retirement and for estate planning, since heirs inherit the tax-free growth.
Example: Roth IRA growth over time
A 30-year-old contributes the full $7,000 to a Roth IRA in 2025, paying income tax on that money as part of their regular salary since there's no upfront deduction. Suppose that single contribution grows to $35,000 by the time they retire decades later, a five-fold increase from investment returns.
Because it's a Roth account and the withdrawal happens after age 59½ with the account open more than five years, the entire $35,000 comes out tax-free — not just the original $7,000 contribution, but all $28,000 of growth on top of it.
Frequently asked questions
Can I withdraw money from my Roth IRA before retirement?
What income limits apply to Roth IRA contributions?
Does a Roth IRA have Required Minimum Distributions?
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.