What is a Roth IRA?

What is a Roth IRA?

A Roth IRA (individual retirement arrangement) is an account you open yourself at a bank or brokerage, separate from any employer plan. The defining feature is when you pay tax: you contribute after-tax dollars, meaning you get no upfront deduction, but your investments grow tax free and qualified withdrawals in retirement are not taxed at all, not even the earnings. That is the opposite of a traditional IRA or a 401(k), where contributions are typically pre-tax and withdrawals are taxed later.

How does a Roth IRA work?

You open the account, contribute after-tax money up to the annual limit, and invest it in whatever the broker offers: stocks, bonds, mutual funds, ETFs, and similar. The account then grows without any tax on the gains along the way, unlike a regular taxable brokerage account where dividends and realized gains are taxed each year. Once you reach age 59½ and have held any Roth IRA for at least five years, withdrawals of both your contributions and the earnings on them come out completely tax free. That combination, tax-free growth plus tax-free withdrawals, is the entire appeal of the account.

Who is eligible for a Roth IRA?

Anyone with taxable compensation (wages, salary, self-employment income) can contribute, but the amount you are allowed to put in shrinks and then disappears as your income rises. Eligibility is based on modified adjusted gross income (MAGI), a version of your income with certain deductions added back. For 2026, the phase-out ranges are:

Source: IRS Notice 2025-67 and IRS.gov, "401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500."

The married-filing-separately range is fixed by law at $0 to $10,000 and does not adjust for inflation, which is why it looks so much narrower than the other two. Someone above the top of their range cannot contribute to a Roth IRA directly, though a workaround (contributing to a traditional IRA, then converting it, commonly called a "backdoor Roth") exists for high earners; the mechanics are beyond this page.

How much can I put in a Roth IRA?

The 2026 base limit is $7,500. If you are age 50 or older at any point in the year, you can add a $1,100 catch-up contribution, for a total of $8,600. This limit is shared across all your IRAs, so if you have both a traditional and a Roth IRA, $7,500 (or $8,600) is the combined maximum across both, not $7,500 into each.

Source: IRS, "401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500," and IRS Notice 2025-67.

If your income falls inside the phase-out range, your limit is reduced rather than eliminated. The IRS formula: take how far your MAGI sits into your range as a fraction, multiply that fraction by your limit, and subtract the result from your limit. For example, a single filer under 50 with $160,000 in MAGI is $7,000 into the $15,000-wide range ($153,000 to $168,000), or 46.7% of the way through. Multiplying 46.7% by the $7,500 limit gives a $3,500 reduction, leaving a maximum allowed contribution of $4,000 for 2026.

What is the 5-year rule for a Roth IRA?

A "qualified distribution," the kind that is completely tax free including earnings, requires two things: you must be at least 59½ (or disabled, or a beneficiary after the owner's death), and at least five years must have passed since the start of the tax year of your first Roth IRA contribution. That five-year clock starts once, the first time you fund any Roth IRA, and it carries forward even if you later open additional Roth IRA accounts at other brokers; the IRS treats all your Roth IRAs as one when applying this rule. Miss either condition, age or the five years, and a withdrawal of earnings is a nonqualified distribution, which can trigger income tax and a 10% penalty on the earnings portion.

Can you withdraw from a Roth IRA?

Yes, and the rules are more forgiving than most people expect, because the IRS tracks what kind of money is coming out. Withdrawals are treated in a fixed order: your contributions come out first, then any converted amounts, and earnings come out last. Since you already paid income tax on your contributions, you can withdraw them at any time, at any age, for any reason, with no tax and no penalty. Only once a withdrawal reaches into the earnings layer do the age and five-year rules matter: pull out earnings before 59½ and before your five-year clock is up, and that portion is generally taxed as income plus hit with a 10% early-withdrawal penalty, though the IRS allows some exceptions (first home purchase up to a lifetime $10,000, certain medical and education costs, disability, and a few others).

Does a Roth IRA have required minimum distributions?

No. The original owner of a Roth IRA never has to take a required minimum distribution (RMD) during their lifetime, no matter how old they get. That is a real difference from a traditional IRA, which forces withdrawals starting at age 73. It means a Roth IRA can keep growing untouched for as long as you live, or pass to an heir with more of its tax-free growth intact. A beneficiary who inherits a Roth IRA does have their own distribution rules to follow, which are separate from this.

Roth IRA vs Traditional IRA, what's the difference?

Both are personal IRAs with the same 2026 contribution limit, but they sit on opposite sides of the tax timeline.

Source: IRS Notice 2025-67, IRS "Retirement topics: IRA contribution limits," and IRS Publication 590-B.

The short version: a traditional IRA usually saves you tax today and taxes you later; a Roth IRA costs you nothing in tax breaks today but pays you back with tax-free money later, plus it never forces a withdrawal. Which one wins depends on whether your tax rate will be higher or lower in retirement than it is now, a question no one can answer with certainty. For a deeper, worked-out comparison including a Roth IRA against a workplace 401(k) and the order to fund each, see Roth IRA vs 401(k).

The flat truth

A Roth IRA is a small-dollar, high-flexibility account. The 2026 cap, $7,500 (or $8,600 at 50+), is modest next to a 401(k)'s $24,500, so it will not carry a retirement on its own for most savers. What it buys is control: your own choice of investments, tax-free growth and withdrawals once you clear the age-59½ and five-year hurdles, penalty-free access to your own contributions at any time, and no forced withdrawals ever. Higher earners should check the income phase-out before assuming they qualify. Everyone else should treat the Roth IRA as the flexible, tax-free layer of a retirement plan that likely also includes a 401(k); see Roth IRA vs 401(k): which to fund first for how the two fit together, and 2026 contribution limits for every retirement account limit in one place.