Roth IRA Calculator

Roth IRA's superpower is tax-free compounding forever. Every dollar your investments earn stays in the account tax-free, and when you withdraw in retirement, none of it is taxed.

Over 30-40 years, this advantage compounds enormously. A 30-year-old maxing out Roth IRA at $7,000/year with a 7% return reaches over $1 million at 65 — all of it tax-free.

Compare that to a taxable account where you'd pay capital gains on every dollar of growth, or Traditional IRA where every withdrawal is taxed as ordinary income.

The classic rule: choose Roth if you expect your retirement tax rate to be higher than your current rate; choose Traditional if you expect it to be lower.

But for most people in their 20s, 30s, and early 40s, Roth is the better default choice because:

• they're in relatively low tax brackets,
• they have decades of tax-free growth ahead,
• and future tax rates are more likely to rise than fall from historical lows.

High earners near retirement may still prefer Traditional for the immediate deduction.

The IRS sets an annual IRA contribution limit that applies across all your IRAs combined — $7,000 for 2025, plus a $1,000 catch-up (total $8,000) if you're 50 or older. Roth contributions use after-tax dollars.

You also need earned income at least equal to your contribution. The limit is adjusted periodically for inflation, so check the current-year figure.

This calculator projects growth from your contribution, but the IRS cap is the ceiling on what you can add each year.

Unlike traditional IRAs, Roth eligibility phases out at higher incomes. Per the IRS, once modified adjusted gross income exceeds the annual threshold (which differs for single vs married filing jointly), your allowed contribution shrinks and eventually reaches zero.

High earners above the limit can't contribute directly — a key difference from the traditional IRA.

Check the current phase-out ranges in IRS Publication 590-A; they rise with inflation each year.

The Roth's power is tax-free growth and withdrawals. Contributing $7,000 a year for 30 years at a 7% average return grows to about $661,226 — and because it's a Roth, qualified withdrawals of that entire balance are tax-free, not just the $210,000 contributed.

You pay tax on the seeds (contributions) but not the harvest (growth). This is why Roths are especially valuable for young savers with decades of compounding ahead.

The choice is a tax bet.

• A Roth (after-tax now, tax-free later) wins if you expect a higher tax rate in retirement — common for young or lower-income earners.
• A traditional IRA (deduction now, taxed later) wins if you expect a lower rate in retirement.

The IRS allows both, subject to limits. Many savers split contributions or favor Roth early in their careers when income and tax rates are lower.

Roth withdrawals follow specific rules. You can withdraw your contributions (not earnings) anytime tax- and penalty-free, since they were already taxed.

Earnings are tax-free only in a 'qualified' withdrawal — after age 59½ AND the account being open at least five years (the 5-year rule). Non-qualified earnings withdrawals may face tax and a 10% penalty.

This flexibility on contributions makes the Roth doubly useful, though it's best left to compound.

High earners barred from direct Roth contributions by the income limit can use a 'backdoor Roth': contribute to a traditional IRA (no income limit on contributions) then convert it to a Roth.

The conversion is a recognized IRS strategy, but the pro-rata rule can make it taxable if you hold other pre-tax IRA money.

Because the mechanics are nuanced, many use it with tax-professional guidance to avoid an unexpected bill.

Both offer tax-free growth, but differ in structure:

• A Roth 401(k) has a much higher contribution limit and possible employer match but limited investment choices;
• A Roth IRA has a lower limit but far more investment freedom and, historically, no lifetime RMDs.

Many savers use both: capture the employer match in the Roth 401(k), then contribute to a Roth IRA for flexibility. The IRS treats them as separate limits.

A major Roth IRA advantage is no Required Minimum Distributions during the owner's lifetime — unlike traditional IRAs and (pre-2024) 401(k)s.

You're never forced to withdraw, so the balance can keep growing tax-free and pass to heirs efficiently. This makes the Roth a powerful estate-planning and longevity tool.

The IRS confirms Roth IRAs are exempt from lifetime RMDs, one reason retirees value having Roth assets.

Frequent mistakes include:

• contributing while over the income limit (triggering an excess-contribution penalty),
• withdrawing earnings before meeting the 5-year and age rules,
• not contributing enough to use the full annual limit,
• and mishandling the backdoor Roth's pro-rata rule.

Check your MAGI against the phase-out, leave earnings to compound, max the limit if you can, and get tax help for conversions. Contributions can be withdrawn freely, but the growth is where the value lies.