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An IRA where you pay taxes now but withdrawals in retirement are tax-free.
Why It Matters
A Roth IRA is many financial experts' favorite account for young investors. You pay taxes now (when you're likely in a lower bracket), then all growth and withdrawals in retirement are 100% tax-free. Invest $7,000/year from age 25-65, and you could have $1.5M+ completely tax-free. You can also withdraw contributions (not gains) anytime without penalty.
Key Points
- Income limits apply: 2024 single filers over $161,000 can't contribute directly (but 'backdoor Roth' exists)
- Best for: younger people, those expecting higher taxes in retirement, or those who want flexibility
- Unlike 401(k)s and traditional IRAs, there are no required minimum distributions (RMDs) in retirement
Related Terms
Common Questions
An IRA where you pay taxes now but withdrawals in retirement are tax-free. A Roth IRA is many financial experts' favorite account for young investors. You pay taxes now (when you're likely in a lower bracket), then all growth and withdrawals in retirement are 100% tax-free.
A Roth IRA is many financial experts' favorite account for young investors. You pay taxes now (when you're likely in a lower bracket), then all growth and withdrawals in retirement are 100% tax-free. Invest $7,000/year from age 25-65, and you could have $1.5M+ completely tax-free. You can also withdraw contributions (not gains) anytime without penalty.
Income limits apply: 2024 single filers over $161,000 can't contribute directly (but 'backdoor Roth' exists)
Best for: younger people, those expecting higher taxes in retirement, or those who want flexibility
Unlike 401(k)s and traditional IRAs, there are no required minimum distributions (RMDs) in retirement