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What is a Roth IRA?

• A Roth IRA is a special type of individual retirement account where you contribute money that has already been taxed. The main advantage of this account is that your investments can grow without being taxed, and you can withdraw both your contributions and earnings tax-free once you reach the age of 59½, provided the account has been open for at least five years. This means you pay taxes on your money before you invest it, but you don’t owe any taxes on your withdrawals later in retirement.

• While Roth IRAs share similarities with traditional IRAs, the key difference lies in taxation. Contributions to a Roth IRA are made with after-tax dollars and are not tax-deductible. However, unlike traditional IRAs, all qualified withdrawals from a Roth IRA, including earnings, are completely tax-free. Features may vary depending on the financial institution, so it’s wise to compare different Roth IRA options before choosing one.