Roth IRA is an individual retirement account and the following are summary of its features:
- Contributions are NOT tax deductible in the year contributed. But, the money grows tax free.
- No income taxes or penalties when funds are withdrawn (principle + earnings) after age 59.5 AND the account has been open 5 years.
- No income taxes or penalties on PRINCIPLE withdrawal at any time.
- No RMD (Required Minimum Distribution), unlike Traditional IRA
- Maximum contribution: $5,500 (for those 50 or older: $6,500) as of 2015.
There are limitations in Roth IRA accounts. For example, if you have an employer sponsored retirement plan such as 401k or 403b, and you file your taxes jointly with your spouse and the combined income is less than $183,000 (2015), then you and your spouse can contribute into own account to the maximum limit. Consult your financial advisor to find out if any restrictions may apply to you.