A Roth IRA is a U.S. retirement account that can offer tax-free qualified withdrawals after age and holding requirements are met.
Roth IRAs were created by the Taxpayer Relief Act of 1997 and are named after Senator William Roth of Delaware. Contributions are generally made with money that has already been taxed, so eligible withdrawals of contributions and earnings can be tax-free under federal rules.
A Roth IRA differs from a traditional IRA, where contributions may be tax-deductible and withdrawals are generally taxed as income. Roth IRAs also do not require the original owner to take required minimum distributions during the owner’s lifetime under current U.S. rules.
Tax treatment depends on the withdrawal type, account age, and individual circumstances. Early or non-qualified withdrawals can trigger taxes or penalties, so the phrase “tax-free” does not mean every withdrawal is automatically exempt.