A Roth IRA is a retirement account funded with after-tax dollars that offers tax-free growth and withdrawals in retirement. Unlike traditional IRAs, contributions aren't tax-deductible, but qualified withdrawals are tax-free.

How Roth IRAs Work:

• Contributions are made with already-taxed money
• Investments can include stocks, ETFs, and bonds
• Earnings grow tax-free
• No required minimum distributions (RMDs)
• Withdrawals are tax-free after age 59½ if the account is at least 5 years old

2024 Contribution Limits:

• Under 50: $7,000
• 50 and older: $8,000

2024 Income Limits: Single Filers:

• Full contribution: Below $146,000
• Reduced contribution: $146,000-$161,000
• No contribution: Above $161,000

Married Filing Jointly:

• Full contribution: Below $230,000
• Reduced contribution: $230,000-$240,000
• No contribution: Above $240,000

Key Benefits:

• Tax-free growth and withdrawals
• No RMDs during your lifetime
• Original contributions can be withdrawn anytime without penalties
• Flexible inheritance options for beneficiaries

Withdrawal Rules:

• Contributions can be withdrawn anytime without penalties
• Earnings withdrawals before 59½ may incur taxes and penalties
• Qualified early withdrawals include first-home purchase, education expenses, and disability-related costs

Potential Drawbacks:

• No immediate tax deductions for contributions
• Income limits may restrict eligibility
• Five-year waiting period for tax-free earnings withdrawals
• Cannot contribute more than earned income

High earners who exceed income limits may consider backdoor Roth IRA conversions or mega backdoor Roth options through employer plans if available.

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