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What exactly is a Roth IRA and would it make sense for you?

As we've mentioned previously when people talk about Roth IRAs and 401ks, the terms are often used almost interchangeably.
Again there not interchangeable at all and they certainly aren't the same. 
There very different in some really major ways.
It's these differences that make a Roth IRA ideal for some and, while never a bad choice, less ideal for others.

A Roth IRA is an individual retirement account made for certain individuals in specific cases.
Higher earners, particularly those who can reasonably expect to maintain a higher than average income even throughout their retirement years can especially benefit from a Roth IRA account.
While higher earners are more likely to benefit from a Roth IRA theres numerous cases where lower-income earners could benefit as well.
One example. If you are planning on living in a state with an especially high income tax rate, even for retirees,
 A Roth might be a good idea.

Also possible is the fact that you might not be a high earner but still manage to prioritize retirement comprehensively enough where a Roth would make sense. 
Basically what were saying here is even someone with a lower income could greatly benefit from this higher earner instrument.

So what exactly is a Roth IRA?
 And what dictates whether it will, or won't make it right for you.
A Roth IRA is an AFTER-TAX method of contributing to a retirement account.
 What that means is you have to take money from whatever you have left after standard payroll deductions and then make contributions to your account.
This is the polar opposite of the 401k method of contributing BEFORE any deductions are taken out.
This method (the 401k) not only generally receives up to a 50% match (usually up to 6%) it lowers your overall tax bill year round.
One feature both have in common is both financial vehicles, Roth or a 401k, both grow tax-free once in your chosen investment plan.

So why would you even consider a Roth over a traditional 401k if both grow tax-free but one is saving me money by lowering my effective tax rate?

In a word.
Taxes.
Remember when we said the 401k is PRE-TAX and a Roth is AFTER-TAX?
Now it's time for the Roth to shine.
Specifically because the tax on a Roth has already been paid the after tax contribution part you don't ever have to pay taxes on it ever again. 
Ever!
It's literally tax-free forever! It's not only tax-free (forever) it grew to that amount over the years tax-free the same way as a 401k. 
Except of course your 401(k) IS taxed after you start the withdrawal process.

Here are a few other instances where the Roth IRA might well be the better choice even for lower income people.

Your company doesn't offer a 401k at all.
 Maybe they offer some other financial instrument such as profit-sharing or employee stock ownership plans.
These are by most accounts inferior to the 401k.
 Again, that's most accounts.
 The solution here is simply enough.
Compare for yourself what you can reasonably expect from these alternative pension plans for the number of years you expect to work there.
Then just compare that to the amount you'd likely have made within a traditional 401k plan.

Your company DOES furnish a plan of sorts but you have serious reservations.

These reservations include no company match (not a dealbreaker but really bad), an especially limited selection of investment choices,
no investment choices except those with high management fees, or perhaps the 401k plan is exclusively in company stock. 

Perhaps your company's administrative plan personnel as either competent or approachable.

If for some reason you feel like you can't, take advantage of your company's plan you have only one choice left.

You have to open a Roth IRA with your own money. 
Without the benefit of pre-tax contributions or a company match a Roth becomes an even better option.
 Even for low income earners.
 Since you can't have any of the advantages of a 401k you might as well have the advantage of a Roth IRA.

Don't forget 401k's and Roth IRAs are generally not an either or scenarios.
If you're putting the max into your 401k, a 401k you can have confidence in, theres no reason you have to end your retirement funding here.
 Sure a smaller income makes it more difficult to set aside more money for retirement but it's hardly impossible.
Nows the time to put any disposable money into a Roth IRA. 
You will owe some tax in your retirement years(from your 401k) but not as much as you would.

Sounds great but there are still many times when a 401k would be preferable.

Your company's 401k plan, like most companies 401k, in all likelihood has some sort of match combined with the pre-tax feature a 401k offers.
It's an extremely difficult combination to beat. This is even more true if your plan administrator offers low cost index funds.
You can contribute far more into a company's 401k plan. 
$23,000 for those under 50, and $30,500 for those over 50.

If you think you'll retire in a state that's tax friendly to retiree pensions such as the 401k the Roth is that much less relevant.
You still have to pay tax at the federal level, always.
 Unless of course you ARE using the Roth.
The Roth is still tax-free forever. Both state and federal.
Finally.
 It's just extremely difficult to scrape together enough money after-tax but before bills to make a Roth viable enough for many of us.
In these cases maxing out your 401k should be your top priority.

The point of all this isn't to sway you toward or away from the Roth IRA but to take into account all the factors where you should invest your money.
Possible for decades.
Unfortunately a Roth IRA can be a complicated decision.
 But a little foresight will help you sidestep many of these.

One last but extremely important note to end this section on.
There are a few important guidelines to remember.
You have to set up your Roth IRA yourself if you decide it's the right retirement plan for you.
The maximum contribution is $7,000 per year until age fifty. After that it grows to $8,000.
If you're married you can add an additional $7,000 even if your spouse doesn't work. $8,000 for spouses over fifty.

Since you can choose when in the year you to contribute into your Roth IRA you should take full advantage of that.

How?
 Try to max out your contributions as early in the year as possible. 
The difference between a $7.000 contribution at the beginning of the year VS the same $7.000 spread throughout IS MASSIVE.