What is a Roth IRA and how does it work?

A Roth IRA is a retirement savings account that lets you invest after-tax money, meaning you contribute funds you've already paid income taxes on. The key benefit is that your money grows tax-free, and qualified withdrawals in retirement are completely tax-free as well. You contribute money up to an annual limit (currently $7,000 per year, or $8,000 if you're 50 or older), invest it in assets like stocks, bonds, or mutual funds, and let it grow over time. To withdraw earnings tax-free, you must be at least 59½ and have held the account for at least five years. Unlike traditional IRAs, Roth IRAs have no required minimum distributions, and you can withdraw your original contributions anytime without penalty. Income limits apply to eligibility.