Roth IRA
A retirement account funded with after-tax dollars - growth and qualified withdrawals are tax-free.
A retirement account funded with after-tax dollars - growth and qualified withdrawals are tax-free.
Contributions to a Roth IRA are not deductible today, but the account grows tax-free and qualified withdrawals in retirement come out untaxed - you pay the tax once, up front, and never again. Income limits gate who can contribute directly (phasing out in the mid-six figures for 2026 filers), annual contribution caps apply regardless of income, and unlike a traditional IRA the Roth has no required minimum distributions for the original owner, making it a flexible long-horizon account.
Strategy flows from the tax asymmetry: contribute Roth when you expect a higher rate in retirement than today, traditional when the reverse is true - and since you can convert existing traditional balances to a Roth (paying tax on the converted amount now), low-income years become conversion windows. Withdrawals of contributions - not earnings - are available at any time without penalty, which gives the Roth a secondary role as an accessible reserve. Backdoor contributions remain the standard workaround above the income line.
Worked example
$7,000 contributed at age 30 at 8% average annual growth becomes roughly $75,000 by age 60 - and a qualified withdrawal of the whole balance carries zero federal income tax, while the same dollars inside a traditional IRA would be taxed as ordinary income on the way out.
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