Roth IRA Law and Legal Definition

A Roth individual retirement account (IRA) allows tax payers, subject to certain income limits, to save money for use in retirement while allowing the savings to grow tax-free. All of the tax benefits associated with a Roth IRA happen when withdrawals are made: withdrawals, subject to certain rules, are not taxed at all (unlike contributions to a traditional IRA).

Roth IRAs convert investment income (dividends, interest, capital gains) into tax-free income. There are no tax benefits associated with contributions (no deductions on your federal tax return) because all contributions to a Roth IRA are made with after-tax monies.