What Is a 'Roth IRA'?

A Roth IRA is a retirement savings account that allows you to withdraw your money tax-free. Learn why a Roth IRA may be a better choice than a traditional IRA for some retirement savers. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Term of the Day | Words to Know Roth IRA A Roth IRA is a tax-advantaged retirement savings account that allows you to withdraw your savings tax-free. Established in 1997, it was named after William Roth, a former Delaware Senator. Roth IRAs are similar to traditional IRAs with biggest distinction between the two being how they're taxed. Roth IRAs are funded with after-tax dollars; the contributions are not tax-deductible. But once you start withdrawing funds, the money is tax-free. Conversely, traditional IRA deposits are generally made with pretax dollars; you usually get a tax deduction on your contribution and pay income tax when you withdraw the money from the account during retirement. This and other key differences make Roth IRAs a better choice than traditional IRAs for some retirement savers. Read More » Related to "Roth IRA" How to Open a Roth IRA Before opening an account, make sure you meet income eligibility requirements and select a provider that won't charge you unnecessary fees. Read More » Roth IRA Contribution Rules: The Comprehensive Guide Everything you need to know about Roth IRA contributions and distributions, from eligibility to income limits to deadlines. Read More » How a Roth IRA Works After Retirement Roth IRAs offer retirees some unique advantages in terms of taxes, withdrawals, and the ability to pass along wealth to the next generation. Read More » PRESENTED BY MORNING BREW Become Smarter In Just 5 Minutes There's a reason over 1.8 million people start their day with Morning Brew — the daily email that delivers the latest news from Wall Street to Silicon Valley. It keeps them informed and entertained, for free. Check it Out » Related Definitions Retirement Planning Retirement planning is the process of determining retirement income goals, risk tolerance, and the actions and decisions necessary to achieve those goals. Read More » Traditional IRA A traditional IRA (individual retirement account) allows individuals to direct pre-tax income toward investments that can grow tax-deferred. Read More » 401(k) Plan A 401(k) plan is a tax-advantaged, defined-contribution retirement account, named for a section of the Internal Revenue Code. Learn how they work, including when you need to change jobs. Read More » 5-Year Rule The 5-year rule deals with withdrawals from Roth and traditional IRAs. Read More » CONNECT WITH INVESTOPEDIA Email sent to: geezers.mail@gmail.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC, All Rights Reserved | Privacy Policy