Roth IRA

retirement

Also known as: Roth, Roth Individual Retirement Arrangement

Updated · Written and reviewed by Konstantin Iakovlev

Detailed explanation

Roth IRA contributions are NOT tax-deductible (unlike traditional IRA), but the trade-off is decades of tax-free growth and tax-free withdrawals after age 59½ (with 5-year holding period). Contributions (not earnings) can be withdrawn anytime without tax or penalty — making the Roth IRA an emergency-fund of last resort. The "backdoor Roth" strategy lets high earners (above the income phase-out) contribute by first contributing to a non-deductible traditional IRA then converting to Roth. Roth IRAs have NO Required Minimum Distributions during the original owner's lifetime, making them excellent estate-planning vehicles.

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