How does a Roth IRA grow over time?

A Roth IRA grows through compound interest and investment returns. You contribute after-tax money, then invest it in assets like stocks, bonds, mutual funds, or ETFs. As those investments generate returns, the earnings get reinvested, and you earn returns on your returns over time, which is compounding. The key advantage is that all growth is tax-free. You pay no taxes on dividends, capital gains, or withdrawals in retirement, as long as you're at least 59½ and the account has been open for five years. The longer your money stays invested, the more powerful compounding becomes. For example, a single $6,000 contribution at age 25 could grow to over $90,000 by retirement at a 7% average annual return.