Roth Individual Retirement Accounts (IRAs)


A Roth Individual Retirement Account (IRA) is a savings tool that offers a way for workers to save for retirement, homeownership, or other purposes. It is also useful for people who  participate in an Individual Development Account (IDA) program. Workers who feel they don’t earn enough to save for retirement may find that the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC) refund are enough to start a Roth IRA.


Roth IRAs offer several advantages over traditional IRAs.

Roth IRA Traditional IRA
Contributions deposited Taxable Non-taxable
Interest earned Generally non-taxable Taxable
Withdrawals Generally non-taxable Taxable
Age limit to contribute No age limit No age limit
Age for withdrawal As early as 59½ As early as 59½; required to begin by April of the year following when you turned 72
Early withdrawal penalties Don’t apply if certain criteria are met Apply for certain withdrawals before 59½


You can withdraw funds in a Roth IRA tax-free if the account is at least five years old and you:

  • are age 59½; or
  • are using IRA funds for a first-time home purchase (up to $10,000 toward each purchase); or
  • have a spouse, child, or grandchild who is using IRA funds for a first-time home purchase (up to $10,000 toward each purchase); or
  • are using IRA funds for higher education expenses; or
  • have a disability.

The main benefit of traditional IRAs is that you can subtract money saved in these accounts from your, which could lower your income tax liability. While Roth IRAs do not provide this benefit, many workers with lower and moderate incomes don’t need this tax benefit because they don’t earn enough to owe income taxes or because they owe income taxes but don’t need an additional deduction.

Some workers who contribute to IRAs may be eligible to claim the Saver’s Credit.


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