A Roth IRA is an individual retirement account to which you contribute money after taxes. While there are no tax benefits for the current year, your contributions and earnings can grow tax-free, and you can withdraw them without taxes or penalties after the age of 59 and a half and once the account has been open for five years. A Roth IRA can be a powerful way to save for retirement, as potential earnings grow tax-free. Plus, you don't have to pay taxes when you make qualifying withdrawals.
1 With Fidelity, you have a wide range of investment options, including options for us to manage your money for you. You will receive exceptional service as well as planning and orientation support. To determine which Roth IRAs are the best overall, Select reviewed and compared more than 20 different accounts offered by domestic banks, investment firms, online brokers and robo-advisors. For the purposes of this ranking, we focus solely on Roth IRAs, although the best providers often overlap with those offered by major traditional IRAs.
Read Select's list of the best traditional IRAs. See our methodology to learn more about how we choose the best Roth IRAs. A Roth IRA is a type of IRA for retirement savings. The advantages of a Roth IRA include no withdrawal requirements and qualifying tax-free withdrawals after age 59 and a half.
While Roth IRAs do not include an employer match, they do allow for a greater diversity of investment options. As with other qualifying retirement plan accounts, the money invested in the Roth IRA grows tax-free. Some open or convert to IRA Roth because they fear an increase in taxes in the future, and this account allows them to fix current tax rates on the balance of their conversions. If you plan to bank with the same institution, see if your Roth IRA includes additional banking products.
There are some unique exceptions to this early withdrawal penalty in Roth IRAs that include buying a home for the first time, college expenses, and birth or adoption expenses. The main benefit of a Roth IRA is that your contributions and earnings from those contributions can grow tax-free and withdraw tax-free after age 59 and a half, assuming the account has been open for at least five years. The only difference is the timing of your tax bill with a traditional IRA, you pay your tax bill later and with a Roth you pay your tax bill in advance. That said, you can always withdraw your Roth IRA contributions at any time without penalties, interest or taxes.
Your investment earnings grow tax-free in the Roth IRA and you never pay taxes on those earnings, assuming you follow the withdrawal rules. Your contributions to the Roth IRA are not tax-deductible, but your qualifying retirement withdrawals will be tax-free. Roth IRAs don't offer tax advantages when you make a deposit, but you can withdraw tax-free money in retirement. Among the disadvantages of Roth IRAs is the fact that unlike 401 (k) IRAs, they don't include an upfront tax cut.