Updated July 2026 · 8 min read
A Roth IRA is a retirement account funded with after-tax dollars. You don't get a tax deduction when you contribute, but all growth and withdrawals in retirement are completely tax-free. For millennials currently in a lower tax bracket than they expect to be in retirement, this trade-off is usually worth it significantly.
The 2026 Roth IRA contribution limit is $7,000 ($8,000 if you're 50 or older). You can contribute any amount up to the limit as long as you have at least that much in earned income for the year. You have until the tax filing deadline (April 15, 2027) to make 2026 contributions — meaning you don't have to fund the full amount by December 31.
Income limits apply. In 2026, the phase-out for single filers starts at $150,000 MAGI and you're fully phased out at $165,000. For married filing jointly, phase-out begins at $236,000. If you earn above these limits, look into the backdoor Roth IRA strategy below.
Go to Fidelity.com, Vanguard.com, or Schwab.com and click "Open an Account." Select Roth IRA. You'll need your SSN, government ID, and bank account details for the initial deposit. No credit check, no approval process — the IRS allows anyone with earned income under the limit to contribute. Initial deposits can be as low as $1 at Fidelity and Schwab.
Opening the account without investing the money is one of the most common and costly Roth mistakes. The account is just the container — you have to buy something inside it. Money sitting in a Roth IRA money market fund earning 4.5% is better than nothing, but you're leaving decades of stock market returns on the table if you forget to invest.
For a set-it-and-forget-it approach: buy a target-date index fund matching your expected retirement year (e.g., Fidelity Freedom Index 2055 Fund for someone born in the early 1990s). It automatically adjusts from aggressive to conservative as you approach retirement. Expense ratio: 0.12%. One fund. Done.
For a slightly more hands-on approach: use the three-fund portfolio (US total market + international + bonds) as described above. Both strategies are sound. The target-date fund is better if you know you won't actively manage allocations.
If your income exceeds the Roth IRA phase-out, you can still contribute via the backdoor Roth: contribute to a traditional IRA (non-deductible) and immediately convert it to a Roth. The IRS allows this, and if you have no existing pre-tax IRA balances, there's typically no tax owed at conversion. If you have existing traditional IRA funds, the pro-rata rule applies and makes the calculation more complex — worth consulting a CPA or fee-only financial advisor.
Will your tax rate be higher or lower in retirement than it is today? If you're a 28-year-old earning $55,000, your effective federal rate is roughly 12-15%. If you expect a higher income in your peak earning years, Roth wins. If you're currently in a very high bracket, a traditional IRA or 401k might win instead. Most people in their 20s and early 30s are in lower brackets now than they will be later — which is exactly why the Roth was designed for them.
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