What are Roth IRAs?

A Roth IRA (Individual Retirement Account) is a special type of retirement savings account that offers unique tax advantages. Unlike traditional IRAs, where contributions are made with pre-tax dollars and withdrawals are taxed in retirement, Roth IRA contributions are made with after-tax dollars. This means you don’t receive an immediate tax deduction, but there are several key benefits:

• Tax-Free Growth: Investment earnings within a Roth IRA grow tax-free.
• Tax-Free Withdrawals: If you meet certain conditions (account held for at least 5 years, withdrawals after age 59½), you can withdraw your contributions and earnings tax-free in retirement.
• No Income Limits for Contributions: Unlike traditional IRAs, there are no income restrictions on who can contribute to a Roth IRA (though contribution amounts may be phased out at higher income levels).
• Flexibility: You can withdraw your original contributions (but not earnings) at any time and for any reason, without taxes or penalties.

Required Minimum Distributions (RMDs) are a mandatory aspect of retirement planning with traditional IRAs and most employer-sponsored plans. These rules require account holders to start withdrawing a specific amount each year once they reach age 72 (or 73 if you turned 72 after December 31, 2022). However, Roth IRAs offer a significant advantage: original owners are generally not subject to RMDs during their lifetime. This article will explore the unique rules governing Roth IRAs and RMDs, helping you understand the benefits and strategies for your retirement savings.