SmartRateToolsDefinition
A Roth IRA is an individual retirement account where contributions are made with after-tax dollars and qualified withdrawals in retirement are tax-free.
Key advantages
- Tax-free qualified withdrawals in retirement
- Contributions (not earnings) can usually be withdrawn without tax or penalty
- No required minimum distributions during the original owner’s lifetime (under current rules)
Potential trade-offs
- No upfront tax deduction on contributions
- Income limits may restrict direct contributions
Who might prefer it
People who expect to be in a higher tax bracket later often consider Roth contributions attractive.