A Roth IRA is not a form of annuity. It is a type of individual retirement account (IRA) that allows you to contribute after-tax dollars, and your investments grow tax-free. Unlike an annuity, which is a financial product that provides a guaranteed stream of income over a specified period or for the rest of your life, a Roth IRA is a savings account designed to help you build tax-free wealth for your retirement.
When you contribute to a Roth IRA, you are essentially setting aside money that you have already paid taxes on, allowing your investments to grow without the burden of additional tax liabilities. This can be an effective strategy for reducing your tax burden in retirement and increasing your overall retirement savings.
While a Roth IRA does not provide a guaranteed income stream like an annuity, it can be a valuable tool for achieving your retirement goals. By contributing to a Roth IRA, you can potentially accumulate significant tax-free wealth, which can be used to supplement other sources of retirement income, such as a traditional IRA, 401(k), or social security benefits. This flexibility in retirement income can help you create a more diversified and sustainable income stream during your golden years.