Contributions are non-deductible and after-tax. Earnings on contributions accumulate on a tax-free basis. Provided certain requirements are met, all contributions and earnings are tax-exempt upon distribution.
After-tax contributions and tax-exempt distributions are the main differences between a Roth IRA and a traditional IRA, but there are others. ROTH IRA rules are generally more relaxed than those governing a tradtional IRA. For example: minimum distributions are not required; income limitations are higher; and a Roth IRA is available to all individuals with earned income regardless of their participation in another qualified retirement plan, such as a pension, 401(k), or profit sharing plan.
To find out more about the benefits and basics of a Roth IRA, please contact us.