Roth IRA
Definition
An individual retirement account funded with after-tax dollars. Contributions are not deductible, but qualified withdrawals in retirement are completely tax-free—including all investment gains. For 2025, the contribution limit is $7,000 ($8,000 if age 50+). Income limits apply: single filers with MAGI above $161,000 face reduced limits, and those above $176,000 cannot contribute directly.
Example
A 30-year-old contributing $7,000/year to a Roth IRA for 35 years with 8% average returns would accumulate roughly $1.2 million—all withdrawable tax-free in retirement.
Related Terms
An individual retirement account where contributions may be tax-deductible, redu...
An employer-sponsored retirement savings plan that allows employees to contribut...
Your total gross income minus specific deductions (called "adjustments to income...