Roth IRA
InvestingA retirement account funded with after-tax dollars where investments grow tax-free and qualified withdrawals are tax-free.
Example
Example: A 25-year-old contributes $7,000/year to a Roth IRA invested in a total stock market index fund. At 8% average return, by age 65 the account holds approximately $1,958,000. Every dollar can be withdrawn completely tax-free — no federal or state income tax on $1.96 million. If the same money went to a Traditional IRA and was taxed at 22% on withdrawal, you would keep only $1,527,000. The Roth advantage: $431,000.