The good thing about saving and investing for retirement is that there are several options you can choose from, each with its own pros and cons. The 401(k) is generally the go-to option, but there are lesser-used options like IRAs that can be great supplements.
A Roth IRA specifically is a retirement account that has a tax break that you don't find with accounts like 401(k)s or traditional IRAs. You contribute after-tax money and then have the chance to take tax-free withdrawals in retirement, potentially saving you thousands in taxes.
Due to its unique tax benefits, the Roth IRA has rules that don't always apply to other types of retirement accounts. Here are five common myths about the account.
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Myth 1: A Roth IRA is tied to an employer like a 401(k)
Unfortunately, you can't get a standard 401(k) without having an employer. This means self-employed people or independent contractors may miss out on the account and its benefits. Luckily, that isn't the case with Roth IRAs. Anyone can contribute to a Roth IRA, as long as it's with earned income.
For example, if you receive a paycheck, self-employment income, or tips, that money is eligible for contribution to a Roth IRA. However, money from sources like Social Security, pensions, or investment interest (like dividends) is not.
Myth 2: High earners can't have a Roth IRA
It's true that there are income limits to be eligible to contribute to a Roth IRA. Starting in 2026, if you're single or the head of household, the income limit is $168,000; if you're married and filing jointly, the limit is $252,000; and if you're married and filing separately, the limit is $10,000.
If you're over these limits, you can still take advantage of a Roth IRA by using the backdoor method.
The backdoor method involves contributing to a traditional IRA (which doesn't have income limits) and then converting it to a Roth IRA. You'll be required to pay taxes on the converted amount, but some people may find it worth it if they have time for the investments in the Roth IRA to grow and compound.
Myth 3: You can't withdraw from your Roth IRA until retirement
You don't want to contribute to a retirement account with the intent of withdrawing from it before retirement (except in a few cases that make sense). However, you never know when you'll need to withdraw some extra money. With a Roth IRA, you can withdraw your contributions, but not earnings, at any time without facing an early withdrawal penalty.
Let's say you contributed $10,000 to your Roth IRA and the balance has grown to $12,000. In this situation, you could withdraw the $10,000 at any time, but not the $2,000 you earned from the account.
Assuming you've made your first Roth IRA contribution at least five years prior, you can withdraw earnings tax-free and without penalties once you turn 59 1/2 years old.
Myth 4: You have to start withdrawing from your Roth IRA at a certain age
Retirement accounts like 401(k)s and traditional IRAs have required minimum distributions (RMDs) beginning at age 73 because they give you a tax break up front and expect to recoup some of that on the back end when you're in retirement.
Since you contribute after-tax money in Roth IRAs, you don't have to worry about taxes when you make withdrawals in retirement, nor are you subject to RMDs. You can keep your investments or cash in a Roth IRA as long as you like, and even pass it on to an heir once you pass away (which many people do if they don't need the funds in retirement).
Myth 5: Roth IRAs have limited investment options
One of my biggest gripes with a 401(k) is that the investment options are typically provided for you, which can be limiting for people who prefer to have more control over their investments.
A Roth IRA is essentially a brokerage account with a major tax break. You can invest in virtually any stock, ETF, or bond that you could in a standard brokerage account.
This freedom allows you to ensure that your investments align with your preferences, rather than simply adapting to what your plan administrator provides.
