If you’re thinking about your future and how to prepare for retirement, you’ve probably come across the term “Roth IRA.” But what exactly is a Roth IRA, how does it work, and why do so many U.S. investors consider it a key part of their retirement planning toolbox?
In this comprehensive guide, you’ll find answers to these questions, along with examples and insights into how you can use platforms like Public.com to manage your Roth IRA journey.
Roth IRA offers tax-free growth – You contribute after-tax dollars, and qualified withdrawals in retirement are tax-free.
Unlike Traditional IRAs, Roth IRAs have no Required Minimum Distributions (RMDs).
You can withdraw your original contributions without taxes or penalties.
Contribution limits depend on your Modified AGI and tax filing status.
You can contribute up to $7,000 ($8,000 if 50 or older).
A Roth IRA is a type of individual retirement account that allows you to contribute after-tax dollars, with the potential for your investments to grow tax-free. When you reach retirement age, you can withdraw your contributions and any investment earnings tax-free, provided you meet certain requirements.
The Roth IRA was established by the Taxpayer Relief Act of 1997 and is named after Senator William Roth. Its primary appeal is the tax treatment: you pay taxes on the money you contribute now, but qualified withdrawals in retirement are not taxed.
There are several reasons why you might find a Roth IRA appealing as part of your long-term savings strategy:
Platforms like Public make it easier for you to open a Roth IRA, giving you tools and resources to understand how it could fit into your overall financial journey.
Here’s how the process typically unfolds:
Let’s consider an example below:
Suppose you contribute $5,000 a year to your Roth IRA for 10 years, totaling $50,000. If your investments grow to $80,000 over that time, you can withdraw the full $80,000 tax-free in retirement, as long as you meet the age and account-holding requirements.
The IRS sets annual limits on how much you can contribute to a Roth IRA. In 2025
These limits apply to the total contributions you make across all your IRAs, not per individual account.
Not everyone can contribute the full amount to a Roth IRA. Your eligibility is determined by your Modified Adjusted Gross Income (MAGI) and tax filing status.
| Filing Status | Full Contribution (MAGI) | Partial Contribution (MAGI) | Not Eligible (MAGI) |
| Single, Head of Household, or Married Filing Separately (did not live with spouse) | Less than $150,000 | $150,000–$165,000 | $165,000 or more |
| Married Filing Jointly or Surviving Spouse | Less than $236,000 | $236,000–$246,000 | $246,000 or more |
| Married Filing Separately (lived with spouse) | Less than $10,000 | N/A | $10,000 or more |
If your income is above these ranges, your eligible contribution amount may be reduced—or you might not be able to contribute at all. In those cases, you might explore an option known as a backdoor Roth IRA.
Whether you’re looking to build long-term retirement savings or roll over an existing IRA, Public.com offers a transparent and easy-to-use experience.
Here’s how to get started:
We offer features like a 1% IRA match, rollover bonuses, and built-in protections, making it easy to manage your retirement savings in one place.
Although a Roth IRA may offer many advantages, there are a few potential downsides to be aware of:
Understanding the potential positives and the limitations may help you decide how a Roth IRA may or may not fit into your broader financial picture.
A Roth IRA may offer more than just tax benefits—it gives you the potential for long-term growth, flexibility, and control over your retirement savings. Whether you’re early in your career or looking to diversify your retirement strategy, understanding how a Roth IRA works can help you make informed decisions.
If you’re considering opening a Roth IRA, sign up on Public.com to get started. Public offers unique features like a 1% match on annual contributions and access to thousands of investment options including stocks, ETFs, bonds, and even options trading.
You can open a Roth IRA anytime during the year as long as you have earned income. Most people open one through a brokerage or financial app that offers retirement accounts. The deadline to contribute for a tax year is typically Tax Day of the following year.
Yes, you can transfer (roll over) a 401(k) to a Roth IRA. This process is called a Roth conversion. If your 401(k) is traditional (pre-tax), you’ll owe income taxes on the amount you convert in the year of the rollover. If you’re rolling over a Roth 401(k), only the employer match portion may be taxable.
You can have multiple Roth IRA accounts, but your total annual contributions across all of them can’t exceed the IRS limit ($7,000 or $8,000 if 50 or older in 2025).
Yes, you can open a Roth IRA for your child if they have earned income (e.g., babysitting, part-time jobs). The account must be a custodial Roth IRA, managed by an adult until the child reaches the age of majority (18–21, depending on the state).
Yes, you can have both a Roth IRA and a 401(k) at the same time, as long as you meet the eligibility and income requirements for each. Each account has its own annual contribution limit, and contributions to one do not affect the limit for the other.
