Roth IRA

Definition

A new type of IRA, established in the Taxpayer Relief Act of 1997, which allows taxpayers, subject to certain income limits, to save for retirement while allowing the savings to grow tax-free. Taxes are paid on contributions, but withdrawals, subject to certain rules, are not taxed at all. Contributions to the Roth IRA are invested in mutual funds, stocks, or other securities, and the amount that someone is able to contribute is dependent upon their income, age, and tax filing status. Unique features of a Roth IRA are that it does not require you to start making withdrawals at a certain age, and also it allows an individual to make a qualified withdrawal up to $10,000 for a first time home purhcase.

Use Roth IRA in a sentence

We had put the client in a roth ira to ensure he would have a comfortable retirement, he thanked us.

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In lieu of traditional pensions, many workers find huge savings potential in a ROTH IRA, making retirement savings extremely successful.

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My Roth IRA was a good investment, because as I saved, I didn't have to pay taxes; now the money has grown so that I can retire comfortably.

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