Roth Individual Retirement Accounts (IRAs)


A Roth Individual Retirement Account (IRA) is a savings tool that provides an alternative for workers who want to save for retirement, homeownership, or other purposes and are unable to participate in an Individual Development Account program. Workers who feel they don’t earn enough to save for retirement may find that the EITC or 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 Up to 70½
Age for withdrawal As early as 59½ Required to begin at 70½
Early withdrawal penalties Don’t apply if certain criteria are met Apply for certain withdrawals before 59½


All funds in a Roth IRA may be withdrawn tax-free as long as the account is at least five years old and:

  • the worker has reached age 59½; or
  • the worker or the worker’s spouse, child, or grandchild is using IRA funds for a first-time home purchase (up to $10,000 toward each purchase); or
  • the worker is using IRA funds for higher education expenses; or
  • the worker is disabled.

The main benefit of traditional IRAs is that workers can deduct contributions to these accounts from their income, reducing their income tax liability. While Roth IRAs do not provide this benefit, many lower- and moderate-income workers don’t need this tax advantage because they don’t earn enough to owe income taxes or because they owe income taxes and 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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