Our Guide to Roth IRAs For Beginners
Roth IRAs are after-tax retirement accounts, in contrast to traditional IRAs and most employer-sponsored retirement plans, which are tax-deferred. Because of their unique tax structure, Roth IRAs have several advantages over other types of retirement accounts. Here's a rundown of what beginners should know before opening their first Roth IRA.
IRA stands for individual retirement account (or individual retirement arrangement, depending on the source). An IRA is a tax-advantaged investment account designed to help Americans save for retirement.
Money invested within an IRA grows over time on a tax-deferred basis. This means that you won't get a tax bill for capital gains, dividend, or interest income taxes for investments that remain in an IRA. You only pay tax on the money in an IRA once -- when you withdraw it or when you contribute it. And this is the major difference between the two main types of IRAs.
Source: Fool.com
