Roth IRA
A retirement account funded with after-tax dollars that grows and can be withdrawn tax-free.
Definition
A Roth IRA is an individual retirement account that allows qualified withdrawals on a tax-free basis, provided certain conditions are met. Contributions are made with after-tax dollars (no tax deduction), but earnings grow tax-free and qualified withdrawals in retirement are completely tax-free. For 2025, the contribution limit is $7,000 ($8,000 if age 50+). Income limits apply — single filers earning above $161,000 and married couples above $240,000 cannot contribute directly. Roth IRAs have no required minimum distributions (RMDs), making them excellent for estate planning. They are generally preferred by younger investors who expect to be in a higher tax bracket in retirement.