Roth IRA Explained: Tax-Free Growth

How a Roth is taxed

There is no deduction for contributions. In exchange, all growth and qualified withdrawals in retirement are entirely tax-free. That is a valuable trade for anyone who expects their retirement tax rate to be similar to or higher than their current rate, and for anyone who values tax diversification against future rate changes.

2026 contribution limit and catch-up

The 2026 Roth IRA contribution limit is 7,500 dollars, with an additional 1,100 dollar catch-up for savers age 50 and over, for a total of 8,600 dollars. The limit applies across all traditional and Roth IRAs combined, not per account.

2026 income phase-outs

• Single filers: phase-out from 153,000 to 168,000 of modified AGI
• Married filing jointly: phase-out from 242,000 to 252,000
• Above the top of the range you cannot contribute to a Roth IRA directly

The 5-year rule

The account must be open at least 5 years before earnings can come out tax-free, even after age 59.5. Contributions themselves can always be withdrawn tax and penalty free. Each Roth conversion also starts its own 5-year clock for the converted amount.

The backdoor Roth

High earners above the phase-out contribute to a nondeductible traditional IRA and then convert it to a Roth. The conversion itself is tax-free if there are no other pre-tax IRA balances (the pro-rata rule); otherwise part of the conversion is taxable.