Roth IRATax-free retirement growth

You can contribute up to the lesser of 100% of your earned income or $7,000 for 2025. Once you reach age 50, contribution limits on IRAs increase by another $1,000. This allows for a "catch-up" contribution for those nearing retirement.

Having a mix of both pre-tax and Roth contributions can help create additional flexibility in retirement to respond to a great unknown—future tax rates. For people who expect income in retirement to be as high or higher than their current level, others who expect their tax rate in retirement to be higher than today, or younger people who expect steady income growth over their careers, Roth IRA contributions may be the better choice. But if you believe that your tax rates will be lower in retirement than they are now, you may want to prioritize pretax vehicles like the traditional IRA. Our IRA Contribution Calculator allows you to answer a few questions and find out which one might be right for you.

Generally speaking, most investors should consider having a Roth IRA as part of their overall retirement plan because it offers federal tax-free growth potential and withdrawals, which have the potential to help minimize taxes and maximize retirement savings. Contributing to a Roth IRA involves income requirements.

With a Roth IRA, you contribute money that's already been taxed (that is, "after-tax" dollars). Any earnings in a Roth IRA have the potential to grow tax-free as long as they stay in the account. Withdrawals of earnings from Roth IRAs are federal income tax-free and penalty-free if a 5-year aging period has been met and the account owner is age 59½ or over, disabled, or deceased. Roth IRAs are not subject to required minimum distribution (RMD) rules during the lifetime of the original owner, so you can leave your assets in the Roth IRA where they have the potential to continue to grow.

With a traditional IRA, contributions can be made on an after-tax basis or a pre-tax (tax-deductible) basis if certain requirements are met. Any earnings in the traditional IRA are tax-deferred as long as they remain in the account. Withdrawals of pre-tax monies are subject to ordinary income tax when withdrawn. RMDs are required from traditional IRAs no later than April 1 of the year following the year in which you turn age 73. If you wait until April 1, you will then be required to take your second distribution by the end of that year.

For both types of IRAs, distributions before age 59½ may be subject to both ordinary income taxes and a 10% early withdrawal penalty. For a detailed comparison, view the traditional vs. Roth comparison table.

Note that with a Roth IRA, you're able to withdraw contributions you've made at any time, for any reason, with no taxes or penalty.

If you contributed or rolled money to a Roth IRA, you will receive Form 5498 from Fidelity in May. This form does not need to be filed with your taxes. Form 5498 summarizes your IRA contributions, rollovers, and fair market value. For help with this tax form, see the IRS Instructions for Form 5498 (PDF).