What Is a Roth IRA or Roth 401(k)?
A Roth account takes contributions after tax, and qualified withdrawals, growth included, come out tax-free. How Roth IRAs and Roth 401(k)s work, the yearly limit, and when Roth beats traditional.
In one sentence
Roth account. A retirement account funded with money that has already been taxed, where qualified withdrawals can be tax-free.
How it works
In a traditional account, contributions go in before income tax and withdrawals are taxed. In a Roth account, contributions are made with money that's already been taxed, and qualified withdrawals, including the growth, are tax-free.1 For earnings to come out of a Roth IRA tax-free, the account generally needs to be at least five years old and you need to be 59½ or older, or meet another condition such as disability.2
| Traditional | Roth | |
|---|---|---|
| Pay set aside | $5,000, untaxed | $5,000, minus $1,100 tax = $3,900 |
| After the investment triples | $15,000 | $11,700 |
| Tax on withdrawal | $3,300 | $0 |
| Yours to spend | $11,700 | $11,700 |
With the same tax rate at both ends, they come out equal. Roth wins if your tax rate is higher when you withdraw; traditional wins if it's lower. That's the real decision.
Limits and rules
- For 2026, you can contribute up to $7,500 across all your IRAs, traditional and Roth combined.3
- Roth IRAs have income limits on who can contribute. Roth contributions to a 401(k) don't.4
- Roth IRAs and Roth accounts in 401(k) and 403(b) plans have no required minimum distributions while the owner is alive.5
Learn it properly
- Taxable vs. Tax-Advantaged AccountsPart 1: Foundations · Free
Notes and sources
- Internal Revenue Service. 401(k) Resource Guide: Plan Participants, 401(k) Plan Overview. Checked 2026-10-05. Back to text
- Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs). Checked 2026-10-06. Back to text
- Internal Revenue Service. 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (IR-2025-111, November 13, 2025). Checked 2026-10-06. Back to text
- Internal Revenue Service. Roth comparison chart. Checked 2026-10-06. Back to text
- Internal Revenue Service. Retirement plan and IRA required minimum distributions FAQs. Checked 2026-10-06. Back to text