Roth IRA
A retirement account funded with after-tax dollars where qualified withdrawals, including all growth, come out tax-free.
What Roth IRA means
A Roth IRA takes money you have already paid tax on. In exchange, everything it earns and everything you eventually withdraw in retirement is free of federal income tax, provided you are at least 59½ and the account has been open five years.
Contributions — as distinct from earnings — can be withdrawn at any time, tax- and penalty-free, because that money was already taxed. That flexibility makes a Roth unusually forgiving for younger savers.
Unlike a traditional IRA or 401(k), a Roth IRA has no required minimum distributions during the original owner's lifetime, so the balance can keep compounding untouched.
Eligibility phases out above certain income levels, and contributions require earned income. Annual limits are well below 401(k) limits, so many people use both: enough in the 401(k) to capture the employer match, then a Roth IRA.
The core decision versus a traditional account is a bet on tax rates — Roth wins if your rate in retirement will be higher than it is now.
Related terms
Traditional IRA
A retirement account where contributions may be tax-deductible now and withdrawals are taxed as ordinary income later.
401(k)
An employer-sponsored retirement account that lets you invest part of your paycheck before taxes, often with a matching contribution.
Tax Bracket
An income range taxed at a particular rate — only the income inside that range is taxed at it, not your whole salary.
Compound Interest
Interest earned on both your original money and the interest already added to it, which makes balances grow faster over time.
Index Fund
A fund that mechanically tracks a market index rather than picking stocks, giving broad exposure at very low cost.
Run the numbers
Retirement Calculator (401k & Roth IRA)
Project your retirement balance with employer match and compound growth, and compare Traditional vs. Roth after-tax outcomes.
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Find your FIRE number, how many years until financial independence, and the age you could retire early — based on your savings rate and returns.
Compound Interest Calculator
See how your savings grow over time with compound interest and regular monthly contributions.
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