A Roth IRA (Individual Retirement Account) may be a great way to save for retirement. The contributions to a Roth IRA are taxable, but the investment gains will grow tax free if you withdraw funds after age 59 ½ and you had the account for over five years. For example, if you contribute $10,000 over time and have investment gains of $5,000, you never pay taxes on the $5,000 investment gains if you meet the requirements above.
You can take a withdrawal at any time, but the earnings will be taxable and likely would be subject to a 10% penalty if you are not over age 591/2 or did not hold the account for at least five years. In the example above, the $10,000 would not be taxed, but the $5,000 would be taxed and likely subject to a 10% penalty.
If you are disabled or are buying a first home, your Roth account withdrawal may not be subject to taxes or penalties. You should talk to a tax advisor if either of these apply.
The maximum contribution to a Roth IRA is $7,000 in 2025. If you are over age 50, you likely will be able to contribute up to $8,000 in 2025.
