Roth IRA Calculator

How to Use This Roth IRA Calculator

This Roth IRA calculator helps you project your tax-free retirement savings and estimate your future income. Follow these steps to calculate your Roth IRA growth:

1. Enter your current age and target retirement age. For tax-free qualified withdrawals, you must be at least 59.5 years old and have held the account for at least 5 years.

2. Input your current Roth IRA balance - the total amount currently in your Roth IRA accounts.

3. Set your planned annual contribution amount, up to the IRS contribution limit for your age.

4. Enter your expected annual investment return rate based on your portfolio allocation and risk tolerance.

5. Specify your expected retirement duration - how many years you plan to withdraw from your Roth IRA.

6. Click "Calculate Roth IRA Growth" to see your projected balance, tax-free monthly income, and estimated tax savings.

What is a Roth IRA?

A Roth IRA (Individual Retirement Account) is a powerful retirement savings vehicle that offers unique tax advantages. Unlike traditional IRAs and 401(k)s, Roth IRA contributions are made with after-tax dollars - you pay taxes on the money before you contribute. In exchange, your investments grow completely tax-free, and all qualified withdrawals in retirement are also tax-free.

This tax-free growth and withdrawal feature makes Roth IRAs exceptionally valuable for long-term wealth building. The longer your money has to grow, the more valuable the tax-free treatment becomes. For example, if you contribute $7,000 annually for 30 years at 7% returns, your account could grow to over $660,000 - and every penny of growth would be tax-free.

Roth IRAs are particularly beneficial for younger investors who expect to be in a higher tax bracket in retirement, or for anyone seeking tax diversification in their retirement portfolio. They also offer flexibility that other retirement accounts do not - you can withdraw your contributions (but not earnings) at any time without penalty.

Roth IRA Contribution Limits (2024)

The IRS sets annual limits on Roth IRA contributions:

• Annual contribution limit: $7,000 for those under 50
• Catch-up contribution: Additional $1,000 for those 50 and older, totaling $8,000

Income limits apply for Roth IRA contributions:

• Single filers: Full contribution allowed if income is under $146,000; phased out between $146,000-$161,000
• Married filing jointly: Full contribution allowed if income is under $230,000; phased out between $230,000-$240,000

Those over the income limits may consider a backdoor Roth IRA strategy by contributing to a traditional IRA and converting to a Roth.

Roth IRA vs Traditional IRA

The key difference is when you pay taxes. With a Traditional IRA, you get a tax deduction today and pay taxes on withdrawals in retirement. With a Roth IRA, you pay taxes today and withdrawals are tax-free. Choose Roth if you expect your tax rate to be higher in retirement, or if you value the flexibility of tax-free withdrawals.

Benefits of a Roth IRA

• Tax-free growth and qualified withdrawals
• No required minimum distributions (RMDs) during your lifetime
• Contributions can be withdrawn anytime without penalty
• Excellent for estate planning - beneficiaries receive tax-free inheritance
• Tax diversification alongside pre-tax retirement accounts
• Flexibility to use for emergency expenses if needed