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An individual retirement account (IRA) known as a Roth IRA enables investors to contribute using after-tax money and then withdraw that money and any returns tax-free after reaching the age of 5912, provided the account has been open for at least five years.
The Taxpayer Relief Act included the introduction of Roth IRAs, which bear the name of their primary legislative proponent, Delaware Senator William Roth.
Roth IRA contributions, unlike those made to standard IRAs, are made with after-tax money because they are not tax deductible. Nonetheless, the contributions' gains increase tax-free, and retirement withdrawals are also tax-free. For those who want to keep their retirement assets growing tax-free for as long as possible, Roth IRAs are a desirable alternative because they have no required minimum distributions (RMDs) throughout the account owner's lifetime.
Contributions to a Roth IRA are subject to income restrictions, and these restrictions may alter annually. A Roth IRA can accept the full contribution as of 2022 from individuals with adjusted gross incomes (AGIs) of up to $140,000 and married couples with AGIs of up to $208,000. Higher-income earners' contributions are scaled back or eliminated entirely.
