Glossary
Roth IRA
A Roth IRA is an individual retirement account funded with after-tax money, in which investments grow tax-free and qualified withdrawals in retirement are entirely tax-free.
There is no deduction going in; the payoff is on the way out. Direct contributions phase out at higher incomes (the backdoor route exists for those above the limits), contributions — though not earnings — can be withdrawn anytime without tax or penalty, and the owner never faces required minimum distributions.
Why it matters in practice
The traditional-versus-Roth choice is essentially a bet on tax rates: pay tax now (Roth) or later (traditional). Roth accounts tend to favor those in lower brackets today than they expect in retirement — often younger workers — and they add flexibility for everyone: tax-free withdrawals do not raise Medicare premiums or Social Security taxation, and heirs inherit them income-tax-free.
In California
CalSavers, the state's auto-enrollment program, funds Roth IRAs by default — so its income and contribution limits are Roth IRA limits, a detail auto-enrolled employees rarely realize.
Related terms: Traditional IRA · Backdoor Roth · IRA (Individual Retirement Account) · CalSavers · Required Minimum Distribution