What is a Roth IRA?

A Roth IRA is an Individual Retirement Account you fund with after-tax dollars. You get no deduction on the way in, but the money grows tax-free, and qualified withdrawals in retirement are completely tax-free. That trade, paying tax now to skip it later, is the entire appeal of the account.

Because you pay the tax up front, a Roth IRA tends to favor savers who expect to be in the same or a higher tax bracket in retirement than they are today. Younger workers early in their careers are the classic fit, but the account also does quiet work later in life: Roth withdrawals don’t count as taxable income, so they don’t push up Medicare premiums or reduce Affordable Care Act (ACA) subsidies the way traditional withdrawals can.

How a Roth IRA Works

You contribute money you’ve already paid income tax on, invest it inside the account, and let it compound. Unlike a taxable brokerage account, you owe nothing on dividends, interest, or capital gains along the way. And unlike a traditional IRA, you owe nothing when you take qualified withdrawals, because the tax was already settled when you contributed.

The catch is that the tax-free treatment on your earnings comes with conditions. Contributions can come back out at any time, but the growth is only tax-free once you clear both an age requirement and a holding-period requirement, covered further down.

Roth IRA Contribution Limits 2026

For 2026, you can contribute up to $7,500 to a Roth IRA if you’re under 50. Savers 50 and older can add a $1,100 catch-up contribution, raising their limit to $8,600.

That cap is a combined limit across all your IRAs. If you split money between a Roth and a traditional IRA, the two together can’t exceed the annual limit. You also need earned income at least equal to what you contribute, though a spouse with earned income can fund a spousal Roth IRA for a non-working partner.

Roth IRA Income Limits 2026

Roth IRAs phase out at higher incomes, based on your modified adjusted gross income (MAGI). For 2026, the phase-out range runs from $153,000 to $168,000 for single filers and from $242,000 to $252,000 for married couples filing jointly. Below the range you can contribute the full amount, within it your limit shrinks, and above it direct contributions are off the table.

High earners who are shut out often use a backdoor Roth IRA instead: you contribute to a traditional IRA, which has no income limit, then convert it to a Roth. There are no income restrictions on the conversion, so it’s a legal workaround to the phase-out, though the pro-rata rule can create a tax bill if you hold other pre-tax IRA balances.

Roth IRA Withdrawal Rules

Roth withdrawals follow a helpful ordering rule: your contributions come out first, then your earnings. Because you already paid tax on the contributions, you can withdraw that portion at any age, for any reason, with no tax and no penalty. This makes a Roth IRA far more flexible than most retirement accounts and is why some people treat it as a backstop emergency fund.

Your earnings are where the conditions apply. A withdrawal of earnings is fully tax-free and penalty-free only when it’s qualified, which means you’re at least 59.5 years old and the account has been open for at least five years. Miss either test and the earnings portion can be taxed and hit with a 10% early-withdrawal penalty, though exceptions exist for cases like a first home purchase (up to $10,000), disability, or certain medical costs.

The 5-Year Rule

The five-year rule is the piece people most often miss. The clock starts on January 1 of the tax year of your first Roth IRA contribution, and it runs regardless of your age. Someone who opens their first Roth IRA at 58 still has to wait five years before the earnings are fully qualified, even though they’ll clear 59.5 well before then. Once any Roth IRA of yours has satisfied the five-year period, it’s satisfied for all of them.

No Required Minimum Distributions

A Roth IRA has no required minimum distributions (RMDs) during the original owner’s lifetime. Traditional IRAs and 401(k)s force you to start drawing down at age 73 whether you need the money or not, which creates taxable income on someone else’s schedule. A Roth lets the balance keep compounding untouched for as long as you like, which makes it a strong vehicle for money you intend to leave to heirs. Inherited Roth IRAs do carry distribution requirements for beneficiaries, so the exemption applies to you, not necessarily to whoever inherits the account.

Roth IRA vs Traditional IRA

The two accounts are mirror images on tax timing. A Roth IRA takes after-tax money now and pays out tax-free later. A traditional IRA often gives you a deduction now, then taxes your withdrawals as ordinary income in retirement.

The decision usually comes down to whether your tax rate is likely to be higher now or in retirement. Lower now favors the Roth, higher now favors the traditional deduction. In practice the answer is rarely obvious, since it depends on future tax rates, your later income, and how the two account types interact with Social Security, Medicare, and ACA thresholds. If you want to compare the long-term tax outcome of Roth versus traditional contributions, or test where Roth conversions make sense, you can model both paths side by side in ProjectionLab rather than guessing.

Frequently Asked Questions

What are the Roth IRA income limits for 2026? Single filers can contribute the full amount below a $153,000 MAGI, with contributions phasing out between $153,000 and $168,000. For married couples filing jointly, the range is $242,000 to $252,000. Above the top of the range, direct Roth contributions aren’t allowed, but a backdoor Roth IRA remains an option.

What’s the difference between a Roth IRA and a Traditional IRA? A Roth IRA is funded with after-tax money and pays out tax-free in retirement, while a traditional IRA is often deductible now but taxed on withdrawal. Roth IRAs have income limits and no required minimum distributions; traditional IRAs have neither restriction but force distributions starting at 73.

Can I withdraw from a Roth IRA before retirement? Yes. You can withdraw your contributions at any time, at any age, with no tax or penalty, because you already paid tax on that money. Earnings are different: withdrawing them before age 59.5 or before the account is five years old can trigger income tax and a 10% penalty, with some exceptions.

What is the 5-year rule for a Roth IRA? Earnings are only tax-free once your first Roth IRA has been open for at least five years, measured from January 1 of the year of your first contribution. The rule applies on top of the age-59.5 requirement, so opening a Roth later in life can mean waiting the full five years even after you turn 59.5.

How much can I contribute to a Roth IRA in 2026? Up to $7,500 if you’re under 50, or $8,600 if you’re 50 or older thanks to the $1,100 catch-up. That limit is shared across all your IRAs and can’t exceed your earned income for the year.