Roth IRA Calculator

You contribute money you have already paid income tax on. There is no deduction in the year you contribute, which is the trade-off compared with a traditional IRA or a pre-tax 401(k). In exchange, the account grows with no annual tax drag on dividends, interest, or capital gains, and qualified withdrawals in retirement are entirely tax-free — both the contributions and every dollar of growth on top of them.

A withdrawal is qualified when the account has been open at least five tax years and you are at least 59½ (or the distribution is due to death, disability, or a first-time home purchase up to a $10,000 lifetime cap). The five-year clock starts on January 1 of the tax year of your first contribution to any Roth IRA, so opening an account early with even a small amount starts the clock ticking.

Your own contributions — not conversions, not earnings — can be withdrawn at any age, for any reason, with no tax and no penalty. That is unique among retirement accounts and is why many people treat a Roth IRA as a retirement account with a built-in backstop. Pulling contributions out is still a bad idea in most cases, because you cannot put them back beyond the current year's limit, but the flexibility is real.

Unlike a traditional IRA, a Roth IRA has no required minimum distributions during the original owner's lifetime. The money can compound untouched into your eighties and nineties, which makes it the natural place to hold your most aggressive, highest-expected-return assets and the natural account to spend last.

The annual IRA contribution limit is a combined cap across all your traditional and Roth IRAs, not a per-account limit. Savers age 50 and over may add a catch-up contribution on top of the standard limit. Contributions for a tax year can be made until the federal tax filing deadline the following April, which means you can still fund last year while funding this year.

You cannot contribute more than your earned income for the year. Investment income, rental income, and Social Security do not count. A non-working spouse can still be funded through a spousal IRA as long as the couple files jointly and the working spouse has enough earned income to cover both contributions.

Direct Roth contributions phase out above a modified adjusted gross income threshold that depends on filing status. Inside the phase-out band your allowed contribution is reduced proportionally; above the top of the band it is zero. Contributing when you are ineligible creates an excess contribution subject to a 6% penalty for every year it stays in the account, so check your MAGI before funding, or wait until year-end when your income is known.

High earners commonly use the backdoor Roth: contribute to a non-deductible traditional IRA, then convert it to a Roth. The catch is the pro-rata rule — if you hold any other pre-tax IRA money, the conversion is taxed proportionally across all your IRA balances, not just the new after-tax dollars. Rolling existing pre-tax IRA balances into a workplace 401(k) first is the standard fix. Talk to a tax professional before running this play.

The textbook rule is simple: if your tax rate in retirement will be higher than your tax rate today, choose Roth; if it will be lower, choose traditional. Mathematically, when the rates are identical, the two are equivalent — paying tax on the seed versus paying tax on the harvest produces the same after-tax dollars.

Reality complicates that clean answer in four ways. First, most people cannot contribute the after-tax equivalent, so a $7,000 Roth contribution is effectively larger than a $7,000 traditional contribution. Second, tax-free withdrawals do not appear in the formula that determines how much of your Social Security is taxable, or in the income test for Medicare IRMAA surcharges. Third, no required minimum distributions means more control over your bracket every single year in retirement. Fourth, heirs inherit a Roth tax-free, which matters enormously under the ten-year distribution rule for most non-spouse beneficiaries.

In practice, young savers in the 12% and 22% brackets almost always benefit from Roth. Peak earners in the 32% bracket and above usually benefit from pre-tax deferral during their working years, then convert to Roth in the low-income window between retirement and the start of Social Security and required distributions. Many households should hold both, because tax diversification lets you choose which bucket to spend from each year.

Whatever you choose, the contribution rate matters far more than the account type. A saver putting away 15% of income into the 'wrong' account will finish far ahead of one putting away 5% into the 'right' one.

Start with a $25,000 balance at age 35, add $7,000 every year, and assume a 7% average annual return. At 65 the account holds roughly $900,000. Of that, about $235,000 is money you contributed and roughly $665,000 is growth. In a Roth IRA every dollar of that growth is yours, tax-free, forever.

Run the same contributions through an ordinary taxable brokerage account at a 22% marginal rate on annual growth and the ending balance drops to roughly $700,000. The gap — around $200,000 — is the value of the tax shelter over thirty years, and it comes from two effects compounding together: no annual tax on dividends and realized gains, and no capital gains tax on the way out.

Delay matters more than most people expect. Starting the same plan at 45 instead of 35 cuts the ending balance by more than half, because the last decade of compounding is the decade that does the heavy lifting. Ten years of $7,000 contributions is $70,000 of principal, but the growth those early dollars would have produced is worth several times that.

Rate assumptions matter too. Drop the return from 7% to 5% and the same plan lands closer to $600,000. A long-run 6% to 7% nominal figure is a reasonable planning assumption for a diversified stock-heavy portfolio, but treat any single projection as a scenario, not a forecast. Re-run the numbers with a pessimistic rate before making irreversible decisions.

Enter your current age and the age you plan to stop contributing. The projection assumes contributions are made once per year and grow for the full year, which is close to the outcome of monthly contributions made early in each year and slightly ahead of contributions made in December.

Current balance should be the total across all Roth IRAs you own. Annual contribution is the amount you actually expect to put in each year — if you plan to add catch-up contributions after age 50, run the projection twice and blend the results, or simply use your average expected contribution.

Expected return should be a nominal annual figure. If you want the answer in today's purchasing power, subtract your inflation assumption from the return: a 7% nominal return with 3% inflation becomes a 4% real return, and the resulting balance is expressed in today's dollars.

The marginal tax rate field is used only for the taxable-account comparison. It represents the rate that would apply to investment income if the same money were held outside a retirement account. Setting it to zero makes the comparison disappear and shows the raw compounding result.

Contributing and never investing is the single most common error. Money that lands in an IRA sits in a settlement fund earning cash rates until you buy something. Every year, thousands of savers discover a decade of contributions sitting uninvested. Set an automatic investment instruction the day you fund the account.

Ignoring the five-year clock is the second. If you have never held a Roth, open one with a nominal amount now, even if you cannot fund it fully, so the clock is already running when you have real money to move.

Chasing the deduction is the third. High earners who default to pre-tax contributions in every account often end up with an enormous traditional balance and no tax-free bucket at all, which leaves them exposed to required distributions, IRMAA surcharges, and whatever future legislation does to tax brackets.

Finally, stopping contributions during a market decline is the most expensive mistake of all. Contributions made during a downturn buy more shares and produce a disproportionate share of the lifetime result. Automate the contribution so the decision is never re-litigated.