What is a Roth IRA?
A Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. Unlike a traditional IRA, you contribute after-tax dollars, but qualified withdrawals are completely tax-free.
2024 Roth IRA Contribution Limits
- Under Age 50: $7,000 per year
- Age 50 and Over: $8,000 per year (includes $1,000 catch-up)
Income Limits for Roth IRA (2024)
Your ability to contribute to a Roth IRA depends on your modified adjusted gross income (MAGI):
- Single Filers: Full contribution if MAGI is under $146,000; phases out up to $161,000
- Married Filing Jointly: Full contribution if MAGI is under $230,000; phases out up to $240,000
Benefits of a Roth IRA
- Tax-Free Growth: Investments grow without being taxed
- Tax-Free Withdrawals: Qualified withdrawals in retirement are tax-free
- No RMDs: No required minimum distributions during your lifetime
- Flexible Withdrawals: Contributions (not earnings) can be withdrawn anytime
- Estate Planning: Tax-free inheritance for beneficiaries
Roth IRA vs Traditional IRA
| Feature |
Roth IRA |
Traditional IRA |
| Contributions |
After-tax |
Pre-tax (tax-deductible) |
| Withdrawals |
Tax-free |
Taxed as income |
| RMDs |
None |
Required at 73 |
When to Choose a Roth IRA
- You expect to be in a higher tax bracket in retirement
- You want tax-free income in retirement
- You want flexibility to withdraw contributions
- You want to leave tax-free money to heirs
