A Roth IRA is funded with after-tax money, so you don't get an upfront deduction, but qualified withdrawals in retirement — including growth — are generally tax-free. Roth IRAs also have no required minimum distributions during the original owner's lifetime under current rules.
Roth accounts can be valuable for tax diversification, giving retirees a source of income that doesn't add to taxable income. Eligibility and contribution limits are set by IRS rules.
Example
A retiree draws from a Roth IRA in a high-income year to avoid pushing more of their Social Security into taxable territory.
This definition is for general educational purposes only and is not financial, tax, or legal advice. Tim Hartle is an independent insurance professional. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company and are not FDIC insured. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances.