Roth IRA Definition

A Roth IRA is a retirement savings plan. With a traditional IRA an individual contributes pre-tax earnings while with a Roth IRA an individual contributes post-tax earnings. With a traditional IRA the retired individual is taxed as funds are withdrawn while with a Roth IRA the retired individual is not taxed on the funds withdrawn (although several restrictions apply).

Roth IRA accounts are attractive to anyone who believes that their taxable rate will be higher in retirement than during employment-which is often caused by a loss of deductibles combined with high retirement income from investment accounts.