Roth IRAs
Roth IRAs offer tax-free growth and withdrawals.
What's a Roth IRA?
It's a retirement account you fund with money you’ve already paid taxes on. Any investment growth is tax-free, and qualified withdrawals are generally not taxed if you meet these requirements:
- You’ve owned the account for 5 years.1
- You're age 59½ or older.2
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Benefits of a Roth IRA
Flexible, tax-free withdrawals
Unlike traditional IRAs and 401(k) plans, you can withdraw your original contributions anytime without taxes or penalties. And there are no required minimum distributions (RMDs).
No age requirement
As long as you have qualifying earned income and are under the income limit, you can contribute to a Roth IRA, no matter your age.
No employer-plan restrictions
You can still contribute to a Roth IRA even if you're covered by an employer's retirement plan, like a traditional or Roth 401(k) or 403(b).
No taxes for your beneficiaries
You can pass your Roth IRA on to your beneficiaries and their withdrawals will generally be tax-free.3
Figure out your max contribution
Your eligibility to contribute to a Roth IRA varies based on by how much you earn. Your
Roth IRA investment options
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Frequently asked questions
Who can open a Roth IRA?
Anyone can open an IRA at any time. However, to contribute, you or your spouse must have earned income. To contribute to a Roth IRA your income must fall within IRS income limits. Even minors with income can save in a Roth IRA, but a parent or guardian must open the account and oversee it until age 18.
Can I have 2 Roth IRA accounts?
Yes, you can open more than one Roth IRA. However, you can’t exceed the IRS contribution limits across all your Roth accounts.
Should I open a Roth IRA?
A Roth IRA can be an advantage to your overall retirement strategy, as it offers tax-free growth and withdrawals. It can help you minimize taxes when you withdraw from your IRA for income in retirement. There are income limitations and withdrawal rules.
If you’re age 59½ or older and have owned your account for at least 5 years,1 you can withdraw money—contributions plus earnings—from your Roth IRA without paying any taxes or penalties.2
Can I roll over a 401(k) plan into a Roth IRA?
A rollover is when you move money from a previous employer plan into an IRA. If you have Roth 401(k) assets, you can roll over those assets into a Roth IRA, tax-free.
You can also move pre-tax 401(k) savings into a Roth IRA, but because it’s treated as a “Roth conversion,” you’ll owe taxes on the converted amount.
What’s a Roth IRA conversion?
A Roth conversion moves money from a pre-tax retirement account, like a traditional IRA or 401(k), to a Roth IRA. After the conversion, you're likely to owe taxes on the converted amount. Once your assets are in the Roth, they can grow and be withdrawn tax-free in retirement.
How do Roth IRAs work?
A Roth IRA can be a great tool to save for retirement. You need qualifying earned income to contribute to a Roth IRA and your contribution eligibility may vary according to your income. After you open your Roth IRA, you can contribute to it by transferring money from your bank account. Once the money is in your IRA, you’ll want to allocate your assets into investments like mutual funds, ETFs, stocks, or bonds. If you leave the money in your settlement fund, it won't have as much potential to grow over time.
When can you withdraw money from a Roth IRA?
You can withdraw your contributions anytime tax- and penalty-free. If you’re age 59½ or older and have owned your account for at least 5 years, 1 you can withdraw contributions plus earnings from your Roth IRA without paying any taxes or penalties.2 If you take money out before meeting withdrawal requirements, you’ll likely owe a 10% penalty tax in addition to ordinary income taxes on your earnings.
Are Roth IRA contributions tax deductible?
No, Roth IRA contributions aren’t tax deductible.
Can you have a Roth IRA and a 401(k)?
Yes, you can have both. Having both a 401(k) and a Roth IRA can maximize your savings, providing tax benefits now and in the future. Why? With a 401(k), you don't pay taxes now, but you do later. With a Roth IRA, you pay taxes now, but not later. This helps hedge against uncertain tax brackets in retirement.
Can I open a Roth IRA for my child?
Yes. As long as your child has qualified earned income that are within the IRS income limitations, they can contribute to a Roth IRA.
The 5-year holding period for Roth IRAs starts on the earlier of: (1) the date you first contributed directly to the IRA, (2) the date you rolled over a Roth 401(k) or Roth 403(b) to the Roth IRA, or (3) the date you converted a traditional IRA to the Roth IRA. If you're under age 59½ and you have one Roth IRA that holds proceeds from multiple conversions, you're required to keep track of the 5-year holding period for each conversion separately.
When taking withdrawals from an IRA before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.
If you inherit a Roth IRA, you must take RMDs, but they're tax-free as long as the original account owner held the account for at least 5 years.
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