how does a Roth IRA work?

Question

I recently opened one and understand I can put money in all year up to $6000. I understand I can buy stocks, mutual funds, and ETFs. But how does it grow? How do the models show exponential growth?

In: 7

Answer 1

It’s not any different from a regular IRA. You can invest in lots of stuff with the money. I recommend the Vanguard target retirement funds as they are diversified. In any case the only other gotcha is that a Roth has income limits, you have to have it for five years before the money is tax free and you have to put post tax money in it (meaning you can’t use the money to reduce your taxable income).