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Originally Posted by yellowmac
How is it not tax free? Am I missing something? My understanding is that as long as you withdraw the earnings after age 59 1/2 and the account has been open for 5 years, those earnings are tax free. If you withdraw your earnings early, that's when you get hit with taxes and penalties, though there are some exceptions. You can always withdraw what you've contributed to the IRA at any time without penalty.
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This is the way I understand it:
With a Roth IRA you put money into it after you're taxed on the money but you're not taxed on your withdrawals since you already paid taxes on it . With a standard IRA or 401K you can not take money out until you're 59 1/2 and your withdrawals are taxed at that time. The benefit is you're income is likely to be less so your tax bracket will be lower when you retire.