Can a ROTH IRA Make You a Millionaire?

• Roth IRAs are funded with after-tax dollars.
• The limits for contributing to a Roth IRA are set at Modified Adjusted Gross Income (MAGI) levels.
• The Roth IRA is a type of individual retirement account (IRA) that doesn't allow contributions to be tax-deductible but withdrawals in retirement are tax-free.

Income limits for contributing to a Roth IRA are set at Modified Adjusted Gross Income (MAGI) levels. For 2019, this is $132,000 for an individual and $193,000 for a married couple filing jointly. If you exceed these limits, your contributions may be fully or partially disallowed.

Roth IRA vs. Traditional IRA

With a traditional IRA, you can start taking distributions from your account at age 701⁄2 without penalty. However, with a Roth IRA, you must wait until age 591⁄2 to withdraw your contributions without facing a penalty.
With a Roth IRA, you can withdraw your contributions at any time without penalty, as long as you have owned the account for more than five years and your account has been open for at least 15 years. However, with a traditional IRA, you generally pay a 10% penalty tax if you withdraw your contributions before reaching age 591⁄2.

Withdrawing from ROTH IRA

If you are under 59 1/2 years old, there are additional penalties for early withdrawal. The following penalties apply to Roth IRA withdrawals before age 59 1/2:
10% penalty tax, in addition to regular income tax, applies to the amount of any early distribution from ROTH IRA's.
Your ROTH IRA distribution will be included in your taxable income for the year it was withdrawn.
If you roll over a ROTH IRA distribution, you may avoid some or all of the 10% early distribution penalty.

Early Withdrawals

If you take money out of a Roth IRA (before age 59 1⁄2), you may be charged a penalty, which varies depending on the IRA account type. However, the penalty only applies to the amount that you take, not the principal itself. Taking too much money out too soon can put you in a poor financial position.
Therefore, if you need the money for an emergency, you are better off withdrawing money from a traditional IRA or 401(k).

Making More Money

If you use your IRA or 401(k) to invest in stocks, your ROTH IRA allows you to make tax-free (or tax-deferred) withdrawals in retirement. Your IRA or 401(k), on the other hand, won't allow you to make withdrawals until the funds in the account are distributed to you (usually after you retire).

More than One ROTH IRA

A ROTH IRA is a retirement account that allows investors to contribute after-tax funds.
While a ROTH IRA, by definition, must allow investors to withdraw funds at any time, a ROTH IRA can be funded with after-tax dollars. This money can be withdrawn tax-free as long as it is used for retirement purposes.
So, while a ROTH IRA can be funded with after-tax dollars, the funds can be withdrawn tax-free too.
Unlike traditional IRAs, ROTH IRAs do not have required minimum distributions (RMD), and they never have to be withdrawn, even if the owner reaches the age of 70 1/2.
So, while it's theoretically possible for an individual to become a millionaire with only a single ROTH IRA, it would require risky investments.