7 Advantages of Roth IRAs: What You Need to Know

Opening an individual retirement account is an excellent step in retirement planning, but first, you must decide: Is a traditional IRA or a Roth IRA better? Any contributions you make to one account type count toward the total annual limit for both account types, so it is crucial to make the right choice. While each has its benefits, these are the greatest advantages of a Roth IRA, including benefits for your tax circumstances.

Consider working with a financial advisor to build a retirement plan for the future.

What Is a Roth IRA?

A Roth IRA is an individual retirement account that uses government-taxed money.

For example, when you receive a $2,000 paycheck from your employer every two weeks, you deposit $200 of each paycheck to your Roth IRA, and the appropriate taxes are taken from your check. When you retire, there will be no taxes due on your Roth IRA distributions because you paid them while working.

This scenario is the opposite of a traditional IRA, which provides an income tax deduction while you work and then is taxed in retirement when you make withdrawals.

Top Benefits of Roth IRAs

Roth IRAs are distinct from traditional IRAs and can help your tax situation in several ways.

Tax-Advantaged Returns

Income taxes are due on withdrawals from tax-deferred accounts like traditional IRAs and 401(k)s. As a result, you end up paying taxes on your initial contribution, as well as any investment earnings.

With a Roth IRA, you do not owe taxes on your investment earnings because your account is funded with after-tax contributions. This aspect increases your income during retirement while minimizing account fees.

Withdrawal Flexibility

Roth IRAs also allow you to withdraw money before retirement. Specifically, you can withdraw your contributions at any age without incurring a penalty.

However, there are a few considerations to keep in mind. First, you must have the account for at least five years before accessing your investment earnings penalty-free. You may also avoid a financial penalty by waiting to withdraw earnings from a Roth IRA until after you reach the age of 59 ½.

That said, several exceptions allow you to skirt the penalties. For example, first-time home buyers can withdraw $10,000 from the account at any time to help with the down payment. You can cover qualified expenses for education, medical expenses, adoption or birth, and your funds are accessible if you pass away or suffer a disability.

Remember, the five-year rule applies after you turn 59 ½, so withdrawals after that age from an account you’ve held for less than five years will still incur taxes and/or penalties. However, once you pass the generation and five-year milestones, your funds are completely accessible without taxes or fees.

At that point, you can withdraw as much money as you want per year without changing your tax situation.

No RMDs

Required minimum distributions (RMDs) are mandatory withdrawals required from many types of retirement accounts. This means retirees must begin taking money from their retirement accounts at age 73, even if they don’t need it.

Fortunately, Roth IRAs are exempt from this rule, meaning your funds will sit in your account and earn interest until you are ready for a distribution.

No Tax Burden for Beneficiaries

Your Roth IRA funds are equally untaxable if you pass away and leave your account to your designated beneficiaries. However, RMD rules still apply, so your loved one who receives the IRA must eventually withdraw all the funds from the account.

Reduced Income Taxes

Because Roth IRA distributions don’t have tax implications, they are helpful if you expect substantial income during retirement.

For example, in 2026, if you file your taxes jointly with your spouse and make less than $100,800 (up from $96,950 in 2025), you remain in the 12% tax bracket. Doing so with a Roth IRA means you will pay this low rate while you work.

Then, your distributions won’t be subject to taxes in retirement so you can avoid falling into a higher tax bracket.

Pairing With Other Account Types

Your Roth IRA provides tax diversification when you contribute to another retirement account.

For instance, if your employer offers a 401(k) plan, you can make pre-tax contributions there and after-tax contributions to your Roth IRA. This option spreads your tax burden across your working years and retirement, reducing financial strain in both stages of life.

No Lifetime Required Minimum Distributions

One additional advantage of a Roth IRA is that the original account owner is not subject to required minimum distributions. Unlike traditional IRAs, funds can remain invested for as long as the owner chooses. This feature allows continued tax-free growth and gives more control over when and whether retirement assets are used.

This can be useful for lowering taxable income later in life or leaving assets to heirs.

Disadvantages of a Roth IRA

An egg labeled "IRA" sitting on a stack of cash.

While Roth IRAs offer a host of benefits, they come with several drawbacks that are important to consider.

Income Level Prevents Accessibility

IRS regulations prohibit Roth IRAs for those with too high a modified adjusted gross income (MAGI). Here’s how the limits apply:

If you’re married and filing jointly with a MAGI of $242,000 or less in 2026 (up from $236,000 in tax year 2025), you can make a full contribution to a Roth IRA.
Those with a MAGI between $242,000 and $252,000 in 2026 ($236,000 and $246,000 in 2025) can make a reduced contribution to a Roth IRA
Couples whose MAGI exceeds $252,000 lose the ability to make a Roth IRA contribution in 2025.
Filing single or as head of household has similar limits of $153,000 in 2026 ($150,000 for tax year 2025).
Those with a MAGI between $153,000 and $168,000 in 2026 ($150,000 and $165,000 in 2025) can contribute a lower amount to a Roth IRA, while those with a MAGI above $168,000 can no longer contribute to a Roth IRA (up from $165,000 in 2025).

Traditional IRAs have no income limits, meaning anyone can contribute to one.

Contribution Limits

Another downside of IRAs is the low annual contribution limit. You can only contribute $7,500 to an IRA in 2026 ($7,000 in 2025). If you’re 50 or older, you can contribute an additional $1,100 in tax years 2026 ($1,000 in 2025).

As a result, you may have to open an additional retirement account, such as a 401(k) or 403(b), to save enough for retirement.

No Immediate Tax Deduction

A Roth IRA does not use pre-tax dollars, so you can’t lower your income taxes with a Roth IRA during your working years. This can hurt your tax situation if you expect your income to be significantly higher in your career than in retirement.

For example, if you make $100,000 in 2026, you’ll pay a 22% marginal tax rate on part of your income before depositing it into your Roth IRA. On the other hand, placing pre-tax dollars in a traditional IRA and planning to withdraw $44,000 each year in retirement means you’ll end up paying only a 12% marginal tax rate, according to 2026 rates.

Conversion Limitations

Because income can limit your ability to contribute to a Roth IRA, conversions are a popular option for high-income earners. This involves opening a traditional IRA, contributing to it and then converting to a Roth IRA. Doing so requires you to pay income taxes on contributions.

The downside is that you can’t convert back to a traditional IRA once it becomes a Roth. Therefore, it’s best to only perform a conversion with a detailed plan in place.

After-Tax Contributions Reduce Current Cash Flow

Another disadvantage not always highlighted is the impact on present-day cash flow.

Because Roth IRA contributions are made with after-tax dollars, contributing the same amount to a Roth IRA costs more out of pocket than contributing to a pre-tax account. For workers with tight budgets, this can limit how much they can save compared to a traditional IRA or employer-sponsored plan that lowers taxable income upfront.

Alternative Retirement Accounts

Because your tax situation or income level might make the Roth IRA subpar or unviable, you may want to consider other retirement savings options.

Traditional IRA: A traditional IRA has no income limits, meaning your annual payments won’t prevent you from contributing to the account. However, the annual contribution limits ($7,500 in 2026 and $7,000 in 2025) still apply.
Brokerage Account: You can also open a taxable brokerage account if you want more accessibility to your funds, with the tradeoff being capital gains taxes on your returns.
Employer-Sponsored Plans: Accounts such as 401(k) and 403(b) accounts are excellent options. You can receive matching contributions from your employer and contribute up to $24,500 in 2026 ($23,500 in 2025).

Bottom Line

A couple discuss the benefits of an IRA with their advisor.

Roth IRAs offer unique tax benefits and withdrawal options for account holders. Specifically, you won’t pay income taxes in retirement on distributions from the account, and you can withdraw your contributions at any time. Plus, they’re accessible to anyone with earned income and a MAGI below the annual income limits.

That said, the Roth IRA’s biggest tax advantage can also be its downfall. If you would rather save pre-tax dollars and pay taxes in retirement, it’s best to contribute to a traditional IRA. In addition, the low annual contribution limit may force you to look elsewhere to save money for retirement. As a result, evaluating your retirement plan and tax circumstances is necessary to know if a Roth IRA makes sense. A financial advisor can help.

Tips for Having a Roth IRA

Understanding pre- and post-tax retirement contributions can be difficult and complex. A financial advisor can help though, and finding one doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
As mentioned, the Roth IRA is just one of many retirement plans available. You can read more about retirement plan types to learn more.