No. of Recommendations: 2
Greetings, Kiri, and welcome. You asked:

Is it really the case that these earnings are "tax-free"? Don't you have to pay taxes each year on any "unrealized gains" (or get a tax deduction from the losses) anyway? You aren't taxed *twice* on the earnings (once when you earn them and once when you withdraw them), but surely the government taxes them at least once.

In a Roth, If the account has been open for at least five tax-years and if you are over age 59 1/2 when withdrawing the money, then everything returns to you free of taxes. Additionally, you pay no income taxes of any kind on the earnings within that account. They are allowed to compound free of taxes within the IRA until you take them out. As long as that's after five years and age 59 1/2, on withdrawal they won't be taxed.

Contrary to your suspicion, the government does NOT tax the earnings at any time unless you fail to follow the Roth IRA rules for withdrawal.

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