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 tax refunds from the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC) are enough to start a Roth IRA. 


Roth IRAs offer several advantages over traditional IRAs.

Roth IRATraditional IRA
Contributions depositedTaxableNon-taxable
Interest earned Non-taxableTaxable
Withdrawals Generally non-taxableTaxable
Age limit to contributeNo age limitNo age limit
Age for withdrawalAs early as 59½As early as 59½; required to begin by April of the year following when you turned 73
Early withdrawal penaltiesDon’t apply if certain criteria are metApply for certain withdrawals before 59½


You can withdraw funds in a Roth IRA tax-free and penalty-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 beneficiary or estate make the withdrawal after your death; or 
  • have a disability. 

If you are under the age of 59½, even if you meet the five-year rule to have the account open, your earnings from the Roth IRA can be charged taxes or penalties, or both. If you are age 59½ and have not met the five-year rule, your earnings will be taxed, but you will not be charged a withdrawal penalty.  

The main benefit of traditional IRAs is that you can subtract money saved in these accounts from your taxable income, which could lower the amount of taxes you owe. 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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