Roth IRAs: What They Are and How They Work

A Roth IRA is an individual retirement account that allows tax-free investment growth and distributions, as long as key rules are followed.

A piggy bank sitting next to a calculator has Roth IRA written on it in black marker.
Roth IRA piggy bank
(Image credit: Getty Images)

A Roth IRA is a type of individual retirement account that allows workers to save money for retirement using after-tax dollars. This means taxes are paid on the contributions before they are placed in the account. As a result, the money is allowed to grow tax-free over time so that it can be withdrawn later on a tax-free basis. 

Essentially, a Roth IRA is the opposite of a traditional IRA in terms of its tax treatment. Taxes are paid before contributions are made to a Roth, but they're paid on a traditional IRA at the time the money is withdrawn. Other than this difference in tax treatment, they are similar in many ways.

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Jacob Wolinsky

Jacob is the founder and CEO of ValueWalk. What started as a hobby 10 years ago turned into a well-known financial media empire focusing in particular on simplifying the opaque world of the hedge fund world. Before doing ValueWalk full time, Jacob worked as an equity analyst specializing in mid and small-cap stocks. Jacob also worked in business development for hedge funds. He lives with his wife and five children in New Jersey. Full Disclosure: Jacob only invests in broad-based ETFs and mutual funds to avoid any conflict of interest.