The Roth individual retirement account

A Roth IRA allows you to avoid future taxation of your retirement funds by making nondeductible contributions now. Contributions for a given tax year can be made up to and including the tax-filing deadline (not including extensions) for that tax year. This includes contributions made to Discover^® Roth IRA Certificates of Deposit (CDs), which offer guaranteed rates, terms ranging from three months to 10 years, and FDIC insurance up to $250,000 per depositor, per account ownership category.

Rules of the Roth IRA

The following is a partial summary of the rules for Roth IRAs:

Contributions are limited to $7,000 a year for the 2025 tax year. Investors aged 50 and older can make an additional $1,000 “catch up” contribution annually.

Income thresholds, such as your modified adjusted gross income (MAGIs), determine whether you are eligible to contribute to a Roth IRA. Your MAGI is your income before any deductions are taken out.

For the 2025 tax year, single taxpayers with MAGI between $150,000 and $165,000, and married couples filing jointly with MAGI between $236,000 and $246,000 are eligible for a partial contribution. Taxpayers earning less than these thresholds may make the full contribution. Those earning more are not eligible to contribute to a Roth IRA.

Qualified distributions are tax free. To qualify, you typically must have maintained a Roth IRA for five years and be at least 59½ years old. There are other exceptional conditions where you might be able to make a qualified distribution. Please discuss any special situation with a tax advisor.

Conversion of a Traditional IRA to a Roth IRA

Because IRA rules are complex, ask your financial advisor about the IRA strategy that’s best for you. Even if you decide not to convert assets to a Discover Roth IRA, you may determine that it makes sense to make a tax year contribution to a Discover Traditional or Roth IRA instead.

A plan that works for you

Now that you know more about the rules of the Roth IRA, you should be better equipped to decide whether it’s the right choice for your savings goals. If you’re still not sure, that’s okay. You can explore the options and benefits of Discover IRA Accounts to find the best fit for your retirement strategy.

The article and information provided herein are not guaranteed by any party and are intended for educational purposes only. Other factors not represented in this article may influence the amounts you are able to contribute or deduct. The information included in the article is based on 2025 IRS limits. The information included is not advice and it may not reflect actual products, services, rates, APYs and/or terms available from Discover Bank. Nothing contained in this article is an offer, solicitation or guarantee for any product or service that may be available from Discover Bank. You may want to contact a financial advisor or tax professional with respect to information contained in this article and how it relates to you.

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The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover Bank or its affiliates.