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How does a Roth IRA grow over time?

A Roth IRA grows through a combination of ongoing contributions, investment performance, and the power of compounding over time. When you contribute to a Roth IRA, your money is invested in assets such as mutual funds, ETFs, stocks, or bonds, depending on your chosen investment strategy. As these investments earn interest, dividends, or market gains, those earnings are reinvested and can generate additional growth in future years.

One of the most valuable features of a Roth IRA is that qualified growth is tax-free. Because contributions are made with after-tax dollars, you generally do not owe taxes on qualified withdrawals of earnings later in retirement. Over long periods, this tax-free compounding can significantly increase the overall value of your retirement savings, especially for individuals who start early or expect higher tax rates in the future.