Retirement account allowing tax-free growth and withdrawals (contributions made with after-tax dollars). Became millennial favorite for flexibility: contributions (not earnings) withdrawable anytime without penalty, useful as dual emergency fund + retirement vehicle.
Contribution Limits & Eligibility
- 2023 limit: $6,500 ($7,500 if 50+)
- Income phaseout: $138K-153K single, $218K-228K married (2023)
- Backdoor Roth: High earners contribute to traditional IRA, immediately convert to Roth (legal loophole)
- Mega Backdoor Roth: After-tax 401k contributions converted to Roth ($43K+ potential, requires employer plan support)
Why Millennials Love It
- Tax diversification: Hedge against future tax increases
- Withdrawal flexibility: Access contributions before 59.5 without penalty
- No RMDs: Unlike traditional IRA, no forced withdrawals at age 73
- Roth conversion ladder: FIRE strategy to access retirement funds early
Bogleheads’ Three-Fund Portfolio
Popular allocation:
- 60% Total US Stock Market (VTI/VTSAX)
- 30% Total International (VXUS/VTIAX)
- 10% Bonds (BND/VBTLX)
Rebalance annually. Hold in Roth for tax-free gains on highest-growth assets.
Sources:
- IRS Roth IRA rules (Publication 590-A)
- r/personalfinance Roth IRA wiki
- Bogleheads investment philosophy