A best day trading platform is a retirement investment account where the contributions you make are after-tax dollars. The money you withdraw later is tax-free, assuming the account has been open for five years or more. Withdrawals of earnings prior to that time may be subject to income taxes and a 10% penalty unless you qualify for an exception.

The IRS also has strict rules about when you can take distributions from a Roth IRA. If you withdraw the money before the account has been opened for five tax years, the penalty is the same as if it were a traditional IRA. However, you can avoid the penalty by using the funds for qualified withdrawals such as a first home purchase, paying qualified education expenses or medical bills related to disability.

What Is a Roth ISA? Exploring the UK Equivalent of Roth IRAs

If you’re interested in opening a Roth IRA, be sure to check out the brokerage firm’s fees and options. Some brokers have low trade commissions and low investment fees (called expense ratios). Others offer extensive retirement planning tools, robust customer service or $0 minimums. If you want to be hands-off, consider opening a Roth IRA at a robo-advisor. These online services choose and manage a diversified portfolio of index mutual funds or ETFs for you. They charge a fee for their services, but they’re generally lower than those of a human financial advisor.

Charles Schwab is a top choice for investors of all types, offering Roth IRA accounts with no trading fees on stocks and ETFs, low fees for options trades and zero account maintenance fees. The firm also offers excellent investor education and support, including a robust library of videos, articles and podcasts. Its robo-advisor, Schwab Intelligent Portfolios, is one of the best in the industry.