Roth IRAs are tax-advantaged retirement savings accounts that work in the following ways:
- Contributions are made with after-tax dollars, meaning you pay taxes on the money before
depositing it into the account
1.
- The funds in a Roth IRA can be invested in various securities such as stocks, bonds,
mutual
funds, ETFs, and more
4. These investments grow tax-free within the account.
- Qualified withdrawals in retirement are completely tax-free, including both
contributions and earnings. To be considered qualified, withdrawals must be made after age 59½ and the
account
must have been open for at least five years
124.
- You can withdraw your original contributions at any time without penalties or taxes,
since
you've already paid taxes on that money
34.
- There are income limits for Roth IRA eligibility. For 2024, single filers with modified
adjusted gross income (MAGI) below $161,000 and married couples filing jointly with MAGI below $240,000 can
contribute the full amount
23.
- The contribution limit for 2024 is $7,000 for those under 50 and $8,000 for those 50 and
older
34.
- Unlike traditional IRAs, Roth IRAs have no required minimum distributions (RMDs) during
the account holder's lifetime, allowing the money to grow tax-free for longer
12.
- Early withdrawals of earnings (before age 59½) may be subject to taxes and a 10%
penalty,
with some exceptions for specific circumstances like first-time home purchases or qualified education
expenses
34.
- Roth IRAs can be opened through various financial institutions, including banks,
brokerage
firms, and robo-advisors
12.