Roth IRA / Roth 401(k)
Pay tax now, grow tax-free, qualified withdrawals are untaxed.
What is Roth IRA / Roth 401(k)?
Funded with after-tax dollars. Growth and qualified distributions - after age 59 1/2 and a five-year holding period - are entirely tax-free. Roth IRA contributions (not earnings) can be withdrawn at any time without tax or penalty, and Roth IRAs have no RMDs for the original owner.
Roth IRA / Roth 401(k): a worked example
$7,500 a year (the 2026 IRA limit) for 30 years at 7% grows to roughly $708,000, none of it taxed on withdrawal.
More terms in Taxes & Account Types
Capital Gain (Short-Term vs. Long-Term)
Profit on a sale, taxed by how long you held it.
Cost Basis
What you paid, used to compute gain or loss on sale.
Wash Sale Rule
A loss is disallowed if you rebuy the same security within 30 days.
Tax-Loss Harvesting
Realizing losses to offset gains and up to $3,000 of ordinary income.
Qualified Dividend
A dividend taxed at long-term capital gains rates.
Traditional IRA / 401(k)
Deduct now, grow tax-deferred, pay ordinary income tax on withdrawal.
Required Minimum Distribution (RMD)
Mandatory annual withdrawals from tax-deferred accounts starting at 73.
Step-Up in Basis
Inherited assets reset to market value at the date of death.