Business, Legal & Accounting Glossary
A Roth IRA – Individual Retirement Account – is a tax-sheltered investment account available to US taxpayers. Contributions to a Roth IRA are allowed to compound free of taxes until they are withdrawn. While traditional IRA contributions may be tax-deductible, Roth IRA contributions are not. Conversely, while funds withdrawn from an IRA are taxed as normal income, withdrawals from a Roth IRA are tax-free. Withdrawals from a Roth IRA prior to age 59 1/2 may incur penalties.
A Roth IRA is self-managed and allows for a very wide range of investment activity. In addition to equities, brokers may give Roth IRA holders access to government and corporate bonds and options. Like traditional IRAs, however, Roth IRAs are restricted by law from trading on margin and not all options strategies are available.
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This glossary post was last updated: 6th February, 2020