Why a Roth IRA is powerful
You contribute money you’ve already paid tax on. After that, the account grows tax-free, and qualified withdrawals in retirement — contributions and decades of growth — are never taxed. In a regular brokerage account, dividends and gains are taxed along the way, which slows compounding.
Example
A 28-year-old with $5,000 who contributes the $7,500 maximum every year at a 7% return would have about $1.35 million tax-free at 65, from $282,500 of contributions. The same deposits in an account whose growth is taxed at 22% each year would reach about $927,000 — the Roth is worth over $420,000 more.
2026 Roth IRA rules
- Contribution limit: $7,500, or $8,600 if you’re 50 or older. The limit is shared across all your traditional and Roth IRAs.
- Earned income: you can only contribute up to your earned income for the year (a spouse with income can contribute for a non-working spouse).
- Income limits: eligibility phases out at higher incomes. Above the limit, many people use a “backdoor” Roth conversion instead.
- Withdrawals: contributions can be taken out any time. Earnings are tax- and penalty-free after age 59½ once the account has been open five years.
- No RMDs: you’re never forced to withdraw during your lifetime.
Roth or traditional IRA?
Roth is usually better if your tax rate today is lower than you expect it to be in retirement — common early in a career. A traditional IRA gives a deduction now and is taxed later, which suits people in their peak earning years who expect lower income in retirement.
Related Tax-Free Growth & Retirement Tools
Roth IRAs provide completely tax-free growth and tax-free qualified withdrawals in retirement. Compare pre-tax employer retirement accounts using our 401k Calculator, calculate your overall post-career nest egg target with the Retirement Calculator, model multi-asset portfolio compounding via the Investment Calculator, and simulate exponential returns using our Compound Interest Calculator.
Frequently asked questions
When is the deadline to contribute for 2026?
You can make 2026 contributions until the federal tax filing deadline in April 2027.
Can I have a Roth IRA and a 401(k)?
Yes. The IRA and 401(k) limits are separate, so you can contribute to both in the same year, subject to the Roth IRA income limits.
What return should I assume?
A Roth IRA can hold almost any investment. Many long-term savers use a diversified stock index fund and assume 6–7% a year; use a lower rate for a more conservative mix.