There are five practical types of Roth IRAs: the standard individual account, the spousal account for a non-working partner, the custodial account for a minor with earned income, the inherited (beneficiary) account passed on after death, and the self-directed account that holds alternative assets like real estate. All five operate under the same 26 U.S.C. § 408A framework, meaning contributions go in after tax and qualified withdrawals come out tax-free, but each has its own rules for who can open one, how it gets funded, and when the money comes out.
Standard Individual Roth IRA
This is the default account most people mean when they say “Roth IRA.” You open it directly with a brokerage, bank, or mutual fund company in your own name. To contribute, you need earned income: wages, salary, tips, professional fees, or self-employment earnings. Passive income from investments, pensions, or rental property doesn’t count.1eCFR. 26 CFR 1.408A-3 – Contributions to Roth IRAs
For 2026, the contribution ceiling is $7,500 if you’re under 50 and $8,600 if you’re 50 or older (the extra $1,100 is the catch-up contribution). Your contribution can never exceed your earned income for the year. Someone who earned $4,000 at a summer job can put in at most $4,000, regardless of the annual cap.2Internal Revenue Service. Retirement Topics – IRA Contribution Limits
High earners get pushed out. The IRS applies a modified adjusted gross income phase-out that reduces the allowed contribution to zero once you cross the top of the range. For 2026:3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
- Single or head of household: $153,000 to $168,000
- Married filing jointly: $242,000 to $252,000
- Married filing separately: $0 to $10,000, which effectively shuts out most filers in this status
Contribute more than you’re allowed and the IRS charges a 6% excise tax on the excess for every year it sits in the account. You can fix it by withdrawing the excess and any earnings on it before your tax-filing deadline, including extensions.
Spousal Roth IRA
The spousal Roth IRA is the exception that lets a non-earning spouse have an account. Normally you need your own earned income to contribute, but under the Kay Bailey Hutchison Spousal IRA rules, a married couple filing jointly can use the working spouse’s income to fund a separate Roth IRA in the non-earning spouse’s name.4Office of the Law Revision Counsel. 26 USC 219 – Retirement Savings
Each spouse gets their own $7,500 contribution limit for 2026 (or $8,600 at 50 and older), but combined contributions across both accounts cannot exceed the couple’s combined taxable income. The account legally belongs to the non-earning spouse and remains theirs regardless of what happens to the marriage. For single-income households, this doubles the annual tax-free savings.
Custodial Roth IRA for a Minor
A child with earned income can own a Roth IRA, but because minors can’t sign financial contracts, the account is opened as a custodial arrangement. A parent or legal guardian manages investments and paperwork while the child owns the assets inside.
The earned income has to be real: a part-time job, babysitting, lawn care, or work at fair market wages in a family business. The contribution is capped at the lesser of the child’s actual earnings or the standard annual limit. A teenager who earns $3,200 over the summer can contribute at most $3,200. Parents or grandparents can gift the contribution money, but only up to what the child actually earned.
When the child reaches the termination age set by their state’s custodial account laws, typically 18 or 21 and in some states as late as 25, the custodial designation ends and the young adult takes full control. The advantage is time. A 16-year-old with modest contributions has almost five decades of tax-free compounding ahead.
Inherited (Beneficiary) Roth IRA
When a Roth IRA owner dies, the account passes to whoever they named as beneficiary. What the beneficiary can and must do with it depends on their relationship to the deceased, under rules the SECURE Act reshaped in 2019.5Internal Revenue Service. Retirement Topics – Beneficiary
Surviving Spouse
A spouse has the most options. They can roll the inherited account into their own Roth IRA, which means no required distributions during their lifetime and continued tax-free growth. Alternatively, they can keep it as an inherited account and take distributions over their own life expectancy. Most spouses roll it over because that preserves the full tax advantage.
Non-Spouse Beneficiaries
Adult children, siblings, friends, and other non-spouse beneficiaries generally fall under the 10-year rule: the entire balance must be withdrawn by December 31 of the tenth year after the owner’s death. Those withdrawals stay tax-free as long as the original owner’s account had satisfied the 5-year holding period. The beneficiary can pull the money on any schedule within that decade, whether all at once, spread evenly, or nothing until year ten, as long as the account is empty by the deadline.
Eligible Designated Beneficiaries
A narrower group can stretch distributions over their own life expectancy instead of following the 10-year rule:
- Minor children of the deceased (not grandchildren) until they reach age 21, at which point the 10-year clock starts
- Disabled or chronically ill individuals
- Beneficiaries no more than 10 years younger than the deceased
Named beneficiary designations on the original account matter. Without one, the account may pass through the estate, which can trigger less favorable distribution timelines and probate complications.
Self-Directed Roth IRA
A self-directed Roth IRA (SDIRA) follows the same contribution limits, income phase-outs, and tax rules as any other Roth IRA. What changes is what you can invest in. Standard Roth IRAs at major brokerages hold stocks, bonds, mutual funds, and ETFs. An SDIRA, held at a specialized custodian, can hold real estate, private equity, promissory notes, and certain precious metals.6Internal Revenue Service. Retirement Plan Investments FAQs
Two categories are flatly prohibited. IRAs cannot hold life insurance policies, and they cannot hold collectibles such as art, antiques, gems, stamps, or alcoholic beverages. Gold, silver, platinum, and palladium coins or bullion that meet specific purity standards are the exception to the collectibles ban.
The bigger risk is prohibited transactions. You cannot buy property from, sell to, or provide services to “disqualified persons,” which includes you, your spouse, your parents, your children, and their spouses.7Internal Revenue Service. Retirement Topics – Prohibited Transactions You also can’t personally use any asset the IRA owns. No living in a rental the SDIRA bought, no weekends at the IRA’s condo. If the IRS finds a prohibited transaction, the entire IRA can lose its tax-exempt status and be treated as fully distributed, triggering an immediate tax bill and potential penalties.8Office of the Law Revision Counsel. 26 USC 4975 – Tax on Prohibited Transactions
Expenses tied to the assets (property taxes, repairs, management fees) must be paid from the IRA’s funds, not your personal account. Income from the assets must flow back into the IRA. SDIRA custodians typically charge annual administrative fees of roughly $250 to $500 plus transaction fees, which can add up quickly with illiquid holdings like real estate.
Backdoor Roth: Not a Separate Type
If your income exceeds the phase-out limits, you may have heard about the “backdoor Roth.” It isn’t a separate kind of Roth IRA. It’s a two-step process: make a non-deductible contribution to a traditional IRA, then convert that balance to a Roth IRA, reported on IRS Form 8606.9Internal Revenue Service. Instructions for Form 8606 The end result is a standard Roth IRA. The strategy works cleanly only when you have no pre-tax money in any traditional, SEP, or SIMPLE IRA, because the IRS applies a pro-rata rule that treats all your traditional IRA balances as one pool and taxes the conversion accordingly.
Rules That Apply to All Roth IRAs
Whatever type you have, the withdrawal rules are the same. You can pull your original contributions out at any time, for any reason, with no taxes or penalties. You already paid tax on that money going in.
Earnings (the investment growth on top of contributions) are different. For earnings to come out completely tax-free and penalty-free, two conditions must both be met: you must be at least 59½ years old, and the account must have been open at least five tax years. The 5-year clock starts on January 1 of the tax year of your first contribution. A contribution made in April 2026 for the 2025 tax year starts the clock on January 1, 2025.10Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
Withdraw earnings before meeting both requirements and you’ll generally owe income tax plus a 10% early distribution penalty. Several exceptions waive the 10% penalty, though the earnings may still be taxable:11Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
- First-time home purchase, up to $10,000 in earnings
- Qualified education expenses
- Permanent disability
- Substantially equal periodic payments under an IRS-approved schedule
Penalty-free and tax-free are not the same thing with Roth earnings, and that distinction trips people up constantly. The exceptions above waive the 10% penalty only. Income tax on the earnings depends on whether you’ve met the age and 5-year requirements.
One feature sets Roth IRAs apart from almost every other retirement account: there are no required minimum distributions during the owner’s lifetime. You never have to take the money out if you don’t want to, which is why the Roth IRA doubles as an estate-planning tool.12Internal Revenue Service. Roth 401(k), Roth IRA, and Pre-Tax 401(k) Retirement Accounts