Definition
An IRA funded with after-tax dollars: no deduction now, but growth and qualified withdrawals are completely tax-free. Contributions (not earnings) can be withdrawn anytime, and eligibility phases out at higher incomes.
Why it matters
The Roth is the only account where compounding is entirely yours: decades of growth the IRS never touches, no RMDs, and contribution flexibility that makes it beginner-safe.
Example
A 25-year-old contributes $500 a month to a Roth IRA. By retirement the account holds several times the total contributions, and every withdrawal, including all the growth, is tax-free.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.