What is a Roth IRA?

A Roth IRA is an individual retirement account funded with after-tax dollars. Because you pay ordinary income tax on the money upfront, 100% of the subsequent investment growth, dividends, and withdrawals in retirement (after age 59½) are completely exempt from federal and state income taxes. Additionally, Roth IRAs have no Required Minimum Distributions (RMDs) during the account owner's lifetime, and you can withdraw your original contributions (the principal you deposited) at any time, for any reason, with zero taxes and zero penalties.