A Roth IRA is a tax-advantaged retirement savings account that allows you to withdraw your savings tax-free.
Roth IRAs are similar to traditional IRAs. The biggest distinction is how they’re taxed. After-tax dollars fund Roth IRAs; the contributions are not tax-deductible. But once you start withdrawing funds, the money is tax-free.
Roth IRAs are best when you think your taxes will be higher in retirement than they are right now. You can’t contribute to a Roth IRA if you make too much money. In 2020, the limit for singles is $139,000. For married couples, the limit is $206,000.
The amount you can contribute changes periodically. In 2020, the contribution limit is $6,000 a year unless you are over 50—in which case, you can deposit up to $7,000.