Roth IRA Calculator
Table of Contents
What is a Roth IRA?
A Roth IRA is a tax-advantaged retirement savings account that allows you to contribute after-tax dollars and receive tax-free growth on your investments. Unlike Traditional IRAs, qualified Roth IRA withdrawals are completely tax-free, making them an excellent long-term wealth-building tool for retirement planning. The account also offers unmatched flexibility with no required minimum distributions during your lifetime.
Key Characteristics of Roth IRAs
How Roth IRAs Create Long-Term Wealth
The power of Roth IRAs comes from compound growth on tax-free earnings. When you invest in a Roth IRA, every dollar of returns compounds without annual tax drag. Over 20, 30, or 40 years, this tax-free compounding creates substantially more wealth than taxable accounts where you pay annual capital gains taxes. This calculator shows the precise advantage by comparing your Roth IRA growth against an identical taxable investment account.
Roth IRA vs. Traditional IRA
Roth IRAs use after-tax contributions with tax-free growth and withdrawals. Traditional IRAs offer upfront tax deductions on contributions but require taxes on all withdrawals in retirement. For long-term wealth accumulation and tax planning, Roth IRAs typically provide greater lifetime tax benefits, especially for younger savers with decades of compounding ahead.
Income Limits and Contribution Rules
For 2025, single filers can contribute fully to a Roth IRA with Modified Adjusted Gross Income (MAGI) up to $146,000. The contribution phases out between $146,000 and $161,000. Married filing jointly can contribute fully up to $230,000 MAGI, phasing out between $230,000 and $240,000. If you exceed income limits, a backdoor Roth conversion strategy provides an alternative pathway to fund these accounts.
Formulas and Calculations
Roth IRA Balance Growth Formula
The core formula calculates Roth IRA balance growth with annual contributions:
Where:
- FV = Future Value (ending balance)
- PV = Present Value (starting balance)
- r = Annual return rate (decimal form)
- n = Number of years
- PMT = Annual contribution amount
Tax-Free Withdrawal Formula
Calculate tax-free withdrawals from Roth IRA qualified distributions:
Requirements for tax-free withdrawals:
- Account owner age 59½ or older
- Roth IRA held for at least 5 tax years
- Withdrawal is qualified (disability, death, first-time homebuyer, etc.)
Taxable Account After-Tax Balance
Compare Roth IRA growth to a taxable investment account with annual tax drag:
Where:
- Annual_Taxes = Investment gains × Marginal tax rate
- Marginal tax rate = Your highest income tax bracket percentage
Tax Savings Calculation
Determine the total tax benefit accumulated in a Roth IRA:
This represents the cumulative tax advantage of using a Roth IRA versus a taxable investment account over the calculation period.
Real Principal vs. Growth
Separate contributions from investment earnings:
This breakdown shows how much of your Roth IRA comes from your own contributions versus investment growth.
Uses and Benefits of Roth IRAs
Retirement Income Planning
Long-Term Wealth Accumulation
For younger investors with 30+ years until retirement, Roth IRAs provide unmatched wealth-building potential. Tax-free compounding over decades dramatically exceeds taxable account growth. Starting contributions in your 20s or 30s can result in hundreds of thousands of dollars in tax-free gains by retirement age.
Legacy and Estate Planning
Roth IRAs are powerful wealth transfer tools. Beneficiaries inherit the account tax-free and can continue enjoying tax-free growth. For high-net-worth individuals seeking to leave the largest possible inheritance, maximizing Roth contributions and allowing the balance to grow throughout retirement creates an exceptional legacy.
High Earner Tax Strategies
High earners exceeding direct Roth contribution limits can use backdoor Roth conversions to fund these accounts. This strategy (converting Traditional IRA balances to Roth) requires careful planning but allows unlimited Roth accumulation for those with substantial income.
Flexibility for Early Withdrawal Needs
Unlike Traditional IRAs and 401(k)s, Roth contributions (not earnings) can be withdrawn anytime without penalties or taxes. This makes Roth IRAs an accessible emergency savings option while maintaining the primary retirement account purpose.
Charitable Giving Strategies
At age 70½, use Qualified Charitable Distributions to donate directly from your Roth IRA to charity. This strategy provides income tax deduction benefits while managing charitable giving objectives.
Business Owner Optimization
Self-employed individuals can contribute to both traditional Solo 401(k)s and Roth accounts, creating diversified tax-advantaged savings with both pre-tax and after-tax options.
How to Use This Calculator
Enter Current Balance
Input your existing Roth IRA account balance. If you're starting fresh, enter $0. If you have multiple Roth IRAs, combine all balances here.
Set Annual Contribution
Enter the annual amount you plan to contribute. For 2025, the maximum is $7,000 (or $8,000 if age 50+), subject to earned income and income limits.
Choose Maximize Contributions Option
Select "Yes" to automatically cap contributions at IRS limits based on your age, or "No" to use your custom contribution amount regardless of limits.
Enter Expected Return Rate
Input your expected annual investment return as a percentage. Use 6-8% for balanced portfolios, higher for aggressive allocation, lower for conservative strategies.
Set Your Current Age
Enter your age in years. This determines how many years until retirement and helps calculate total compounding periods.
Enter Retirement Age
Specify the age at which you plan to retire. The calculator shows projections until this age, revealing your projected Roth IRA balance at retirement.
Set Marginal Tax Rate
Enter your expected marginal tax rate (highest tax bracket) as a percentage. Use 22% for roughly $44,725-$95,375 (2025 single), 24% for $95,376-$182,100, etc.
Calculate and Review Results
Click Calculate to generate your results. Review the annual schedule showing year-by-year growth in your Roth IRA versus an equivalent taxable account, plus total tax savings.
Roth IRA Calculator
Your Roth IRA Projection
Annual Growth Schedule
| Age | Principal (Start) | Principal (End) | Roth IRA (Start) | Roth IRA (End) | Taxable (Start) | Taxable (End) |
|---|
Key Takeaway:
According to provided calculations, your Roth IRA can accumulate $0 more than a regular taxable account by age 65.
How This Calculator Works
Step 1: Input Processing and Validation
The calculator validates all inputs to ensure they are logically consistent and within realistic ranges. Current age must be less than retirement age, contribution amounts must be positive, and tax rates must fall between 0-37%. Invalid inputs trigger helpful error messages.
Step 2: Contribution Cap Calculation
If "Maximize contributions" is selected, the calculator applies 2025 IRS limits: $7,000 for those under 50 years old, and $8,000 for those 50 and older. The calculator adjusts contribution amounts if custom amounts exceed these limits.
Step 3: Annual Compounding for Roth IRA
Using the future value formula with annual contributions, the calculator compounds your starting balance and annual contributions at your expected return rate. Each year: New Balance = (Previous Balance + Contribution) × (1 + Return Rate)
Step 4: Taxable Account Simulation
The calculator models an identical investment in a taxable account, reducing annual returns by your marginal tax rate. This accounts for capital gains taxes paid annually: Taxable Return = Return Rate × (1 - Tax Rate)
Step 5: Year-by-Year Schedule Generation
The calculator generates an annual schedule from your current age to retirement age, showing:
- Principal balances (starting and ending each year)
- Roth IRA account balance growth
- Equivalent taxable account balance
- Tax advantage accumulation
Step 6: Tax Savings Calculation
Tax savings equal the difference between Roth IRA and taxable account balances. This represents the cumulative value of never paying taxes on Roth gains and the tax-free withdrawals available in retirement.
Step 7: Earnings Separation
The calculator isolates investment earnings from principal contributions by subtracting total contributions from the final Roth IRA balance. All these earnings grow tax-free in a Roth IRA.
Key Assumptions
- Contributions occur at the beginning of each year
- Investment returns compound annually at the specified rate
- Marginal tax rate remains constant throughout the period
- Capital gains from taxable account are fully taxed annually
- No withdrawals occur until retirement age
- IRS contribution limits remain as specified in 2025
Frequently Asked Questions
A Roth IRA is a tax-advantaged retirement savings account where you contribute after-tax dollars and all future growth and withdrawals are tax-free. Unlike Traditional IRAs, Roth IRA withdrawals in retirement are completely tax-free, and you're never required to take minimum distributions. For younger investors, Roth IRAs offer exceptional long-term wealth accumulation through tax-free compounding.
The 2025 Roth IRA contribution limit is $7,000 for individuals under age 50 and $8,000 for those age 50 and older (catch-up contributions). These limits apply to your combined contributions across all IRA types (Traditional and Roth). Your total contributions across both account types cannot exceed these annual maximums. Contribution limits typically increase annually with inflation in $500 increments.
Roth IRAs offer significant tax advantages compared to taxable accounts. Roth withdrawals are tax-free while taxable accounts require paying capital gains taxes annually on investment earnings. Over 20-40 years, this tax advantage compounds dramatically—a Roth IRA can accumulate significantly more wealth than an identical taxable investment. This calculator quantifies the exact financial advantage based on your expected return and tax rate.
You can withdraw your contributions (not earnings) anytime without penalties or taxes. However, earnings cannot be withdrawn tax and penalty-free until you reach age 59½ and have held the account for at least 5 years. Early withdrawal of earnings may incur a 10% penalty plus income tax. Exceptions exist for disability, death, first-time homebuyer purchases (up to $10,000), and qualified education expenses.
Roth IRA contributions are subject to Modified Adjusted Gross Income (MAGI) limits. For 2025, single filers can contribute fully with MAGI up to $146,000, with contributions phasing out between $146,000 and $161,000. Married filing jointly can contribute fully up to $230,000 MAGI, phasing out between $230,000 and $240,000. High earners exceeding these limits can use backdoor Roth conversions as an alternative strategy.
A backdoor Roth is a strategy for high-income earners who exceed Roth contribution income limits. You contribute to a Traditional IRA (which has no income limits), then immediately convert it to a Roth IRA. This allows those with substantial income to effectively contribute to Roth IRAs indirectly. Be aware of the pro-rata rule if you have other Traditional IRA balances, as it may affect tax consequences.
No, Roth IRAs have no Required Minimum Distributions during the account owner's lifetime. This is a significant advantage over Traditional IRAs, which require RMDs starting at age 73. This feature makes Roth IRAs superior for legacy planning and wealth transfer to heirs, as your account can continue growing tax-free indefinitely without mandatory withdrawals.
Marginal tax rate is the tax percentage applied to your highest income dollar. For 2025, single filers in the 22% bracket have MAGI between $11,600 and $47,150, while those in the 24% bracket range from $47,151 to $100,525. Higher marginal tax rates mean greater tax benefits from Roth IRAs, as you avoid taxes on all gains. Estimate your retirement tax bracket conservatively to calculate realistic tax advantages.
Tax savings equal the difference between your Roth IRA ending balance and an equivalent taxable account balance. The Roth grows tax-free at your specified return rate, while the taxable account's annual returns are reduced by your marginal tax rate (capital gains taxes). Over decades, this compounds into substantial tax savings that represent actual wealth accumulation difference between the two account types.
Yes, you can contribute to both Traditional and Roth IRAs in the same year, but your combined contributions cannot exceed the annual IRS limit ($7,000 for 2025 under age 50). However, your ability to deduct Traditional IRA contributions may be limited if you're covered by an employer retirement plan. For maximum tax optimization, many tax professionals recommend maximizing Roth contributions first for younger savers, then using Traditional IRAs for additional pre-tax savings.