Invest after-tax dollars today for tax-free growth and withdrawals in retirement
IRS figures on this page are for tax year 2026. Last reviewed September 19, 2026.
A Roth IRA is a retirement account where you contribute money you've already paid taxes on. In exchange, all your investment growth and withdrawals in retirement are completely tax-free. Contribute the $7,500 maximum (tax year 2026) every year for thirty years and every dollar of growth on top of it — dividends, capital gains, all of it — comes out untaxed.
This is the opposite of a Traditional IRA, where you get a tax deduction now but pay taxes when you withdraw in retirement.
You contribute after-tax money up to the annual limit: $7,500 for tax year 2026, or $8,600 if you are 50 or older. Your contributions can be invested in stocks, bonds, ETFs, or mutual funds — just like a regular brokerage account.
The key advantage: every dollar of growth is tax-free forever. No taxes on dividends, no taxes on capital gains, and no taxes when you withdraw in retirement (after age 59½). You can also withdraw your contributions (not earnings) at any time without penalty.
Annual contribution limit (tax year 2026): $7,500, or $8,600 if you are 50 or older
Income phase-out (tax year 2026): $153,000–$168,000 single, $242,000–$252,000 married filing jointly — you can contribute a reduced amount inside the range and nothing above it
Contributions (not earnings) can be withdrawn anytime penalty-free
No required minimum distributions (RMDs) — ever
The Roth IRA was created by the Taxpayer Relief Act of 1997. Named after Senator William Roth, it was designed to give working Americans a way to save for retirement with tax-free growth.
The younger you are, the more powerful a Roth IRA becomes. A 25-year-old who contributes the full $7,500 every year until 65, earning 8% annually, ends up with roughly $1.9 million — and owes nothing on any of it. The identical contributions to a Traditional IRA build the same balance, but every withdrawal is taxed as ordinary income, so what you can actually spend is meaningfully less.
If your tax rate in retirement will be higher than today (likely for young earners), a Roth IRA saves you money. You're essentially locking in today's lower tax rate.
Tax-free growth and withdrawals in retirement
No required minimum distributions
Contributions withdrawable anytime (not earnings)
Excellent estate planning tool — heirs receive tax-free money
Provides tax diversification in retirement
No upfront tax deduction (you pay taxes now)
Income limits may disqualify high earners
Relatively low annual contribution limit ($7,500 for tax year 2026)
Earnings penalty if withdrawn before 59½ and before 5-year rule
Doesn't reduce your current tax bill
A Roth IRA is especially valuable for younger investors who are currently in a lower tax bracket than they expect to be in retirement.
Young professionals: Your current low tax bracket makes Roth contributions a bargain — pay low taxes now, zero taxes later.
Mid-career earners: Even if your bracket is moderate, tax-free growth over 20+ years is extremely valuable.
Anyone with taxable income: If you're under the income limit, there's rarely a reason not to contribute to a Roth IRA.
Check your eligibility: Verify your income is under the Roth IRA limits for tax year 2026 — contributions phase out between $153,000–$168,000 filing single and $242,000–$252,000 married filing jointly. If you earn too much, look into "backdoor Roth" contributions.
Open a Roth IRA: Choose a low-cost broker like Vanguard, Fidelity, or Schwab. Opening an account is free and takes 15 minutes.
Choose your investments: A target date fund or a simple three-fund portfolio works perfectly inside a Roth IRA.
Maximize contributions: Try to contribute the full $7,500 for tax year 2026. If you can't, any amount helps — even $100/month.