Roth IRA

A Roth IRA is a type of individual retirement account. Unlike with a traditional IRA, investors don’t receive a tax break for their contributions, as they contribute after-tax dollars. In a Roth IRA, contributions grow tax-free, and investors can withdraw money tax-free after the age of 59 ½.

There are limits to how much you can contribute to a Roth IRA each year depending on your income level. Withdrawals are also subject to additional rules. To withdraw your money tax-free and without penalty, you must be at least 59 ½ years old and have the account for at least five years. Early withdrawals are subject to a penalty, but there are some exceptions.