A Roth IRA is one of the most powerful tools in personal finance. You pay tax on contributions today; growth and qualified withdrawals in retirement are tax-free. Contribution limits are set annually by the IRS and phase out at higher incomes.
Roth is especially valuable early in a career, when income and marginal tax rates are lower. Contributions (not gains) can generally be withdrawn any time, tax and penalty-free.
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Open Financial OS →Frequently asked questions
Roth or Traditional IRA?
Roth if you expect higher tax rates in retirement than today; Traditional if you expect lower rates. Many people benefit from having both.
What is the backdoor Roth?
A strategy for high earners over the income limit: contribute to a nondeductible Traditional IRA, then convert to Roth. Watch out for the pro-rata rule if you hold other pre-tax IRA money.