- The definition of a Roth IRA is a type of tax-advantaged individual retirement account which allows the funds to be withdrawn tax free once the account owner reaches retirement age.
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 William Victor Roth, Jr. (1921–2003), US congressman.
(plural Roth IRAs)
- Roth 401(k)
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Money for certain eligible expenses can be withdrawn before age 59⁄ without paying tax or penalties, provided that the account has been active for five years.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.