Blog

Roth IRAs are flexible investment vehicles. You can typically invest in stocks, bonds, mutual funds, ETFs, and CDs. Some custodians even allow alternative assets like real estate or precious metals, though these come with stricter rules.
The key is diversification. A Roth IRA isn’t an investment itself—it’s a tax-advantaged account wrapper. The growth potential depends on the investments you choose, so aligning them with your risk tolerance and time horizon is essential.

Yes, you can open a Roth IRA for a minor as long as they have earned income, such as wages from a part-time job. The contribution limit is the lesser of their earned income or the annual Roth IRA cap. Parents often act as custodians until the child reaches adulthood.
This strategy can be incredibly powerful because the child’s contributions have decades to grow tax-free. Even modest contributions in their teens can compound into significant retirement savings, teaching financial responsibility along the way.

No, Roth IRAs do not require you to take distributions during your lifetime. This is a major advantage over traditional IRAs, which force withdrawals starting at age 73.
Because of this, Roth IRAs are often used strategically in estate planning. You can let the account grow tax-free for as long as you live, and then pass it on to heirs, who will have their own distribution rules but still benefit from tax-free growth.

If you withdraw contributions, there’s no penalty. But if you withdraw earnings before age 59½ and before meeting the five-year rule, you’ll likely owe both income tax and a 10% penalty.
There are exceptions, such as using up to $10,000 for a first-time home purchase or covering qualified education expenses. Still, tapping your Roth early can reduce its long-term growth potential, so it’s best reserved for true emergencies.

Yes, you can contribute to both a Roth IRA and a 401(k), provided you meet the income limits for Roth contributions. The two accounts are independent, and contributing to one does not reduce your ability to contribute to the other.
This dual approach can be powerful: a 401(k) often provides an employer match and higher contribution limits, while a Roth IRA offers tax-free withdrawals and more flexible investment choices. Together, they diversify your tax exposure in retirement.

The five-year rule requires that your Roth IRA be open for at least five tax years before you can withdraw earnings tax-free. This clock starts on January 1 of the year you make your first contribution, not the exact date of the deposit.
This rule applies separately to conversions as well. If you convert funds from a traditional IRA to a Roth, each conversion has its own five-year clock for penalty-free withdrawals, even if you’re over 59½.

You can withdraw your contributions (the money you put in) at any time, tax- and penalty-free. The rules are stricter for earnings: to withdraw them tax-free, you must be at least 59½ and have held the account for at least five years.
If you withdraw earnings before meeting these conditions, you may face both taxes and a 10% penalty. However, there are exceptions for certain situations, such as first-time home purchases, qualified education expenses, or disability.

For 2025, the contribution limit is $7,000 per year, or $8,000 if you’re age 50 or older (thanks to the “catch-up” provision). These limits apply across all IRAs combined, so if you have both a traditional and a Roth IRA, your total contributions cannot exceed the annual cap.
It’s important to note that contributions must come from earned income, such as wages or self-employment earnings. Investment income, rental income, or pensions don’t count toward eligibility for contributions.

Eligibility depends on your income and tax filing status. For example, in 2025, single filers with a modified adjusted gross income (MAGI) above $165,000 and married couples filing jointly above $246,000 are phased out of direct contributions.
However, even if your income is too high, you may still access a Roth IRA through a “backdoor” strategy, which involves contributing to a traditional IRA and then converting it to a Roth. This option has its own rules and tax implications, so it’s wise to plan carefully.

The key difference lies in taxation. With a traditional IRA, you may deduct contributions from your taxable income, but withdrawals in retirement are taxed as ordinary income. With a Roth IRA, you pay taxes upfront, but withdrawals in retirement are tax-free.
This distinction means the “best” choice depends on your current and future tax situation. If you expect your tax rate to be higher in retirement, a Roth IRA is often more advantageous. If you expect it to be lower, a traditional IRA may save you more money.