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A Roth IRA (Individual Retirement Account) is a tax-advantaged investment account created specifically for retirement savings. Unlike a traditional IRA or 401(k), contributions to a Roth IRA are made with after-tax money — you don't get a tax deduction today. The benefit comes later: all growth and qualified withdrawals in retirement are completely tax-free.
The 2025 contribution limit is $7,000 per year ($8,000 if you're 50 or older). Income limits apply: for 2025, single filers can contribute the full amount up to $150,000 in modified adjusted gross income (MAGI), with phase-outs through $165,000. Married filing jointly can contribute fully up to $236,000, phasing out through $246,000. Above the upper limits, you can't contribute directly but may use the "backdoor Roth" strategy.
Money inside a Roth IRA can be invested in stocks, index funds, ETFs, bonds, or mutual funds — the account itself is just the tax wrapper. Most people open Roth IRAs at brokerages like Fidelity, Vanguard, or Charles Schwab, all of which offer no-fee accounts and low-cost index funds. Fidelity and Schwab even offer zero-expense-ratio index funds.
A key flexibility feature: you can withdraw your contributions (not earnings) from a Roth IRA at any time without penalty or taxes, because you already paid tax on that money. This makes it a useful emergency backstop in addition to a retirement vehicle — though ideally you'd leave contributions to compound undisturbed.
This is general information — consult a financial advisor for personalized retirement planning. The general rule of thumb: if you're young and in a lower tax bracket now than you expect to be in retirement, a Roth IRA is likely better than a traditional IRA. If you're in your peak earning years, a traditional IRA or 401(k) deduction may be more valuable.