Quick Definition

A Roth IRA is a type of individual retirement account that allows for tax-free growth and tax-free withdrawals in retirement, provided certain conditions are met.

Examples

• 1A 30-year-old starts contributing $5,000 annually to a Roth IRA and continues until retirement at age 65, potentially accumulating a significant tax-free retirement fund.
• 2An individual switches from a traditional IRA to a Roth IRA through a conversion to take advantage of tax-free withdrawals after retirement.
• 3A retiree withdraws funds from their Roth IRA at age 70 without facing any federal tax liabilities, using the money to fund travel and leisure activities.

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