Roth IRA
An Individual Retirement Account funded with post-tax dollars where contributions are not tax-deductible, growth is tax-free, and qualified withdrawals after age 59½ are tax-free. Subject to annual contribution limits and income-based phase-outs.
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The Roth IRA is a US individual retirement account established by the Taxpayer Relief Act of 1997. The defining feature is the tax treatment: contributions are made with post-tax dollars (no deduction in the year of contribution), all growth inside the account compounds tax-free, and qualified withdrawals after age 59½ are entirely tax-free at the federal level. State tax treatment is generally aligned with federal, though a few states differ at the margin. The Roth structure is the most favorable tax treatment available to US retail savers, and its existence is one of the most important features of US retirement planning.
Annual contribution limits for 2026 are $7,500 for individuals under age 50 and $8,600 for individuals age 50 and over (including a $1,100 catch-up contribution). These limits are aggregate across all IRA contributions in a year — if you contribute to both a Traditional IRA and a Roth IRA, the combined total cannot exceed the limit. The contribution must come from earned income (wages, salary, self-employment income); investment income and most retirement income do not qualify as earned income for contribution purposes. Spouses with little or no earned income can still contribute to a spousal Roth IRA based on the working spouse's earned income, provided the couple files jointly.
Income-based eligibility phase-outs limit who can contribute directly to a Roth IRA. For 2026, the phase-out for single filers begins at $153,000 of modified adjusted gross income (MAGI) and ends at $168,000, above which direct Roth contributions are disallowed. For married couples filing jointly, the phase-out is $242,000 to $252,000. High-income households who cannot contribute directly can often access Roth IRAs through the "backdoor Roth IRA" — contributing to a Traditional IRA and immediately converting to Roth — though the math gets complicated if the household has other Traditional IRA balances due to the pro-rata rule.
The strategic value of Roth contributions versus Traditional IRA contributions depends on the relationship between your current marginal tax bracket and your expected retirement marginal tax bracket. The conventional rule of thumb ("Roth when young, Traditional when old") is right roughly half the time. The bracket-aware version of the math is: contribute to Roth when your current bracket is at or below your expected retirement bracket; contribute to Traditional when your current bracket is higher. The investing hub's tax-advantaged hierarchy pillar covers this decision in detail with worked examples at typical bracket combinations.
- Roth IRA explained: contributions, limits, withdrawals Roth IRA basics for US workers — 2026 limits, income phase-outs, the five-year rule, withdrawals, and the structural advantages.
- The US tax-advantaged account hierarchy HSA, 401(k) match, Roth IRA, max 401(k), mega backdoor Roth, taxable — the order to fund US retirement accounts, with bracket-aware math.
- The backdoor Roth IRA — Roth contribution above the income limit How to contribute to a Roth IRA above the income limit: the two-step conversion, the pro-rata rule, Form 8606, and when the strategy works.
- Roth conversion ladder — the FIRE-era 5-year tax-arbitrage strategy How early retirees convert Traditional money to Roth in low-bracket years and access converted principal penalty-free 5 years later — before age 59½.
- 401(k) match math: the highest-ROI dollar in personal finance The 401(k) employer match captures a 50–100% return before any market return. Match formulas, vesting schedules, true ROI, and the math.
- Traditional IRA An Individual Retirement Account funded with pre-tax dollars (deductible up to income limits if a workplace retirement plan is available) where growth is tax-deferred and withdrawals in retirement are taxed as ordinary income. Required Minimum Distributions begin at age 73.
- 401(k) An employer-sponsored defined contribution retirement plan governed by Internal Revenue Code Section 401(k), allowing employees to defer pre-tax compensation (Traditional 401(k)) or post-tax compensation (Roth 401(k)) into investment options selected by the plan. The largest US retirement savings vehicle by assets.
- Mega backdoor Roth A 401(k) strategy where an employee contributes after-tax dollars beyond the standard employee deferral limit and converts them to Roth, either inside the plan or via in-service withdrawal to a Roth IRA. Can add up to approximately $47,500 of additional Roth contributions per year for employees of plans that permit it.
- Saver's Credit (Retirement Savings Contributions Credit) The Saver's Credit is a non-refundable federal tax credit worth 10%, 20%, or 50% of the first $2,000 of retirement contributions ($4,000 for married filing jointly), available to low-to-moderate income filers who contribute to a 401(k), IRA, or similar retirement account.
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