Roth IRA

A Roth IRA is an individual retirement account funded with post-tax dollars. You pay income tax on the money you contribute, but everything that happens inside the account from then on — investment growth, dividends, and qualified withdrawals after age 59½ — is completely tax-free. The trade-off versus a traditional IRA is upfront tax now in exchange for zero tax later.

Three features make Roth IRAs especially useful:

• No required minimum distributions (RMDs) during the original owner’s lifetime, unlike traditional IRAs and most 401(k)s.
• Tax diversification in retirement — having both pre-tax (traditional) and post-tax (Roth) buckets gives flexibility on withdrawal strategy.
• Contribution withdrawals can be taken back tax- and penalty-free at any time (earnings can’t until 59½ plus 5 years).

Contribution limits for 2026:

• $7,000 (under 50) or $8,000 (50+) combined across all traditional and Roth IRAs.
• Income phase-out: Roth contributions phase out for high earners. The 2026 single phase-out is $150,000–$165,000 AGI; married filing jointly is $236,000–$246,000.

The “backdoor Roth” — contribute to a nondeductible traditional IRA, then convert to Roth — is the common workaround for above-phase-out earners. Use the IRA comparison calculator to compare Roth vs traditional at your tax rates.