Core Points - Roth IRAs allow tax-free withdrawals of contributions and earnings at retirement, provided five years have passed since the first contribution [1][4] - Beneficiaries of Roth IRAs do not owe taxes on inherited accounts, making them advantageous for estate planning [2] - Early withdrawals of investment earnings may incur income tax and a 10% penalty, although exceptions exist for certain qualified expenses [3][5] Contribution and Income Limits - In 2026, the contribution limit for Roth IRAs is set to increase to $7,500, with an additional catch-up contribution of $1,100 for individuals aged 50 and older [9] - Single filers can contribute to a Roth IRA if their modified adjusted gross income is below $153,000, with reduced contributions allowed up to $168,000; for married couples filing jointly, the limits are $242,000 and $252,000 respectively [16] Investment Options and Strategies - Roth IRAs can be used for a variety of investments, including stocks, mutual funds, and ETFs, which typically offer higher returns compared to traditional bank accounts [3][18] - The Roth IRA is a favorable option for rolling over funds from a Roth 401(k), allowing for broader investment choices without tax liabilities [8] Comparison with Traditional IRAs - Unlike traditional IRAs, Roth IRAs do not provide an upfront tax deduction, but allow for tax-free withdrawals in retirement [6][13] - Traditional IRAs have no income restrictions for contributions, but tax deductions are subject to income limits if the individual has a retirement plan at work [14][17]

Core Insights - Financial expert Suze Orman emphasizes the importance of opening a Roth IRA without delay, even with minimal contributions, to avoid future tax complications [1] - The Roth IRA allows for tax-free growth of funds contributed after taxes, with specific conditions for tax-free withdrawals of both contributions and earnings [2] Contribution Rules - Contributions to a Roth IRA can be withdrawn at any time without taxes or penalties, regardless of age or account duration [4] - The five-year rule does not apply to original contributions, allowing for immediate access to the contributed amount [4] Earnings Withdrawal Conditions - To withdraw earnings tax-free, account holders must be at least 59½ years old and have maintained the Roth IRA for a minimum of five years [5] - Failure to meet both conditions may result in ordinary income tax on earnings [5] Timing Considerations - Opening a Roth IRA later in life can complicate access to earnings; for instance, an individual starting at age 58 must still wait five years to withdraw earnings tax-free, even if they are over 59½ [6] Conversion Rules - Roth conversions from traditional IRAs have their own five-year rule, with each conversion starting a new five-year period [7] - Early withdrawal of converted amounts before the five-year period, if under 59½, may incur a 10% penalty despite having paid taxes on the conversion [7]