One advantage of a Roth IRA is that money can be withdrawn penalty-free at any age versus paying a penalty for withdrawals under age 59 1/2 with a traditional IRA.
An example of a Roth IRA is an account that you open for your retirement that receives special tax treatment from the IRS.
Origin of Roth IRAafter Senator W. V. Roth (1921-2003), Senate Finance Committee chairman who sponsored legislation creating this kind of account
Origin of Roth IRAAfter William Victor Roth , Jr. (1921-2003), US congressman
(plural Roth IRAs)
After William V. Roth Jr., who pushed for legislation that would allow for such IRAs; and IRA, initialism of individual retirement account.
roth ira - Investment & Finance Definition
An individual retirement account (IRA) that was introduced in 1998 and provides an alternative to a traditional IRA. With a Roth IRA, deductions can only be made with after-tax money. However, earnings are not taxed when the distribution is taken at 59⁄ years of age after holding the account for at least 5 years.
Money for certain eligible expenses can be withdrawn before age 59⁄ without paying tax or penalties, provided that the account has been active for five years. Those expenses include higher education, $10,000 for a first-time home purchase, and payment of health insurance for unemployed people.
A contribution of $3,000 a year can be made for a single person who earns up to $95,000, with ineligibility starting to occur at $110,000. Married couples can contribute $6,000 if they earn up to $150,000, with eligibility phasing out at $160,000.