What is the difference between a Roth IRA and a regular brokerage account?

The investments are the same; the tax wrapper is different. A regular brokerage account is the plain version: put in as much as you like, take it out whenever you like, and pay tax each year on dividends and on gains when you sell.

A Roth IRA is a retirement account with a deal attached. You contribute money you have already paid income tax on, up to a limit set each year (a few thousand dollars), and in exchange everything that happens inside it is tax-free: no tax on dividends, none on gains, and none on withdrawals after age 59 and a half, provided the account has been open five years. For a young person with decades of growth ahead, that tax-free compounding is worth a great deal.

The catch is access. Withdrawing earnings before retirement age usually means tax plus a 10 percent penalty. One softener: you can withdraw your original contributions, not the growth, at any time without penalty, which makes a Roth less locked-up than people fear.

A common order of priority for savings: enough in a 401(k) to get the employer match, then a Roth IRA up to the limit, then back to the 401(k) or into a brokerage account for whatever is left. The brokerage account is the right place for money you might want before retirement.