A 401(k) is a great start, but it might not be enough on its own. If you’re looking for more ways to grow your retirement savings—and keep more of it when you retire—a Roth IRA can help.
With a Roth IRA, your investments grow tax-free, and you won’t pay taxes when you take the money out in retirement. It’s also one of the few accounts that offers flexible access to your contributions if you need cash earlier in life.
Here’s how a Roth IRA works, who qualifies, and how to make the most of it.
What is a Roth IRA?
A Roth IRA (Individual Retirement Account) is a type of retirement savings account that allows you to save and invest money for retirement on a tax-advantaged basis.
Contributions to a Roth IRA are made with after-tax dollars, meaning you cannot claim a tax deduction for the money you contribute. However, once the money is in the account, it can grow tax-free, and you can withdraw it tax-free in retirement.
This can be extremely beneficial because the money you contribute to a Roth IRA should grow (ideally substantially) between when you put cash in and when you start to take it out. But since you pay income taxes on it the first time around, you don’t have to do it again, even though the amount is larger.
You get to pick the investments in which to place your Roth IRA funds, such as:
- Individual stocks
- Mutual funds
- Bonds
- Options (though this would be part of a more aggressive investment strategy)
How a Roth IRA Works and Why It’s Tax-Friendly
A Roth IRA comes with many tax benefits, which is why it’s so popular these days. Even if you have a 401(k), it’s a great tax-advantaged addition to your retirement plan. And if you’re self-employed or don’t have a 401(k) at work, it’s a good start to investing for your retirement goals.
Here’s how a Roth IRA works:
- Eligibility: To be eligible to contribute to a Roth IRA, you must have earned income and your income must fall below certain thresholds.
- Contributions: You can contribute up to a certain amount each year to a Roth IRA, depending on your age and income. Contributions are made with after-tax dollars and are not tax-deductible.
- Investment options: You can invest the money in your Roth IRA in various ways, such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs).
- Tax benefits: Earnings on your investments grow tax-free, and you can withdraw your contributions and earnings tax-free in retirement as long as you meet certain conditions.
- Withdrawals: You can withdraw your contributions to a Roth IRA at any time without penalty. However, you may owe taxes and a penalty if you withdraw your earnings before you reach age 59 1/2 and have not held the account for at least five years.
Roth IRAs can be a valuable tool for saving for retirement, especially for people who expect to be in a higher tax bracket in retirement than they are now.
Roth IRA Contribution Limits for 2026
For 2026, you can contribute up to $7,000 to a Roth individual retirement account if you’re under age 50. If you’re 50 or older, you can make an additional $1,000 catch-up contribution, bringing the total limit to $8,000.
There is no minimum contribution requirement, and you can keep contributing at any age as long as you have earned income and stay within the income limits discussed below. That makes a Roth individual retirement account useful not only for retirement planning, but also for estate planning and passing assets to heirs.
Roth individual retirement accounts also provide more flexibility than many other retirement accounts. You can withdraw your original contributions at any time without taxes or penalties. While earnings withdrawn early may be subject to income taxes and a 10% penalty, certain exceptions apply, such as qualified education expenses or a first-time home purchase.
Because of that flexibility, a Roth individual retirement account can serve different purposes throughout your life, not just during retirement.
Roth IRA vs. Traditional IRA: Key Differences
The biggest difference between a Roth IRA and a traditional IRA is when you pay taxes.
With a traditional IRA, you can deduct your contributions in the year you make them, which can lower your taxable income now. But when you withdraw the money in retirement, you’ll pay income taxes on both the contributions and any earnings.
With a Roth IRA, contributions are made with after-tax dollars. You don’t get an upfront tax break, but your money grows tax-free—and qualified withdrawals in retirement are also tax-free.
This difference can impact your strategy depending on your current and expected future income. If you expect to be in a lower tax bracket during retirement, a traditional IRA might offer more short-term savings. But if you think your tax rate will stay the same or increase, a Roth IRA could save you more in the long run.
Required Distributions and Tax-Free Withdrawals
Traditional individual retirement accounts are subject to required minimum distributions. As of 2026, you must begin taking required minimum distributions at age 73. The amount you’re required to withdraw is based on your age and Internal Revenue Service life expectancy tables. Withdrawals taken before age 59½ may also be subject to a 10% penalty, in addition to ordinary income taxes, unless an exception applies.
Roth individual retirement accounts do not require distributions during the account holder’s lifetime, which makes them useful for long-term planning and passing assets to heirs.
To take tax-free withdrawals from a Roth individual retirement account, the account must have been open for at least five tax years, and one of the following conditions must be met:
- You are age 59½ or older
- You become disabled
- You use up to $10,000 for a first-time home purchase
- The withdrawal is taken by a beneficiary after your death
This difference in tax treatment is one reason many investors choose to hold both Traditional and Roth individual retirement accounts as part of a broader retirement plan.
Roth IRA Income Limits and Eligibility for 2026
To contribute to a Roth individual retirement account, you must have earned income and fall within Internal Revenue Service income limits. Higher earners may see their contribution amount reduced or phased out entirely based on modified adjusted gross income.
Income Limits for Single Filers
If you file as single or head of household:
- Full contribution: Modified adjusted gross income of $146,000 or less
- Partial contribution: Modified adjusted gross income between $146,001 and $161,000
- No contribution: Modified adjusted gross income of $161,000 or more
Income Limits for Married Filing Jointly
If you are married and file jointly:
- Full contribution: Combined modified adjusted gross income of $230,000 or less
- Partial contribution: Modified adjusted gross income between $230,001 and $240,000
- No contribution: Modified adjusted gross income of $240,000 or more
These income limits apply to 2026 contributions and are subject to periodic adjustment based on inflation.
Why It Pays to Start Early
If your income is still within the allowed range, it’s smart to open and fund a Roth IRA while you can. Contributions made earlier have more time to grow tax-free, and once your income rises above the threshold, you won’t be able to add new money directly.
Even if you’re planning for early retirement or other financial goals like paying for education, a Roth IRA offers flexibility that other retirement accounts don’t—making it a useful part of both short- and long-term financial planning.
How to Open a Roth IRA
You can open a Roth IRA through most banks, credit unions, online brokers, or robo-advisors. The key is to compare providers based on fees, investment options, and ease of use.
Look for platforms that offer commission-free ETFs and mutual funds with no transaction fees. Over time, high fees can eat into your returns—so choose a provider that keeps costs low.
If you plan to roll over funds from a 401(k) or traditional IRA, make sure the provider supports rollovers and offers guidance through the process. Not all robo-advisors accept rollovers, so double-check before you commit.
With a little research, you can find a Roth IRA provider that fits your needs and helps you grow your retirement savings with minimal hassle.
Where to Open a Roth IRA
To open up a Roth IRA, you need to select a brokerage firm. You may be able to do this at a financial institution you already work with, or you could explore other options. Both online and brick-and-mortar banks can serve as a broker. It really depends on where you want to house your investment and the type of fee structure you prefer.
Start with a bank you already use, but don’t be afraid to compare their offerings and fees to other financial institutions. It’s important to maximize your earnings so that you can retire comfortably.
How to Manage a Roth IRA
Once your Roth individual retirement account is open, the next step is funding it. You can contribute earned income up to the annual limit or move money over from a Traditional individual retirement account or a workplace plan like a 401(k). Keep in mind that converting pre-tax funds to a Roth triggers income taxes at the time of the conversion, so it’s important to plan for the tax impact.
Roth individual retirement account contributions follow the standard tax-filing deadline. For example, 2026 contributions can be made up until the tax filing deadline in April 2027, unless the Internal Revenue Service grants an extension. This gives you time after the calendar year ends to finish funding the prior year’s contribution.
After funding the account, the next step is choosing how to invest the money. Your investment mix should align with your age, time horizon, and financial goals. Younger savers often favor growth-oriented approaches such as stock index funds, while those closer to retirement may shift toward more conservative options like bond exchange-traded funds.
Low-cost, diversified investments, such as index funds and exchange-traded funds (ETFs), are commonly used for long-term Roth individual retirement account strategies. These options provide broad market exposure while keeping ongoing fees relatively low.
Final Thoughts
A Roth IRA gives you tax-free growth, flexible access to your contributions, and no required minimum distributions. It’s one of the most versatile retirement tools available.
To make the most of it, contribute as much as you can while you’re eligible. If a raise or job change could push you over the income limit, maxing out your Roth IRA now gives your investments more time to grow.
And don’t just “set it and forget it.” Revisit your contribution strategy and investment choices each year to keep pace with your goals, tax bracket, and retirement timeline.
Whether you’re decades away from retirement or planning to leave work early, a Roth IRA can give you more control over your financial future.