Roth IRA Calculator

A Roth IRA is funded with after-tax dollars, so your contributions and all investment growth can be withdrawn completely tax-free in retirement. A Traditional IRA is funded with pre-tax dollars, which lowers your taxable income today, but every withdrawal in retirement — including growth — is taxed as ordinary income. The right choice often depends on whether you expect your tax rate to be higher or lower in retirement than it is now.

For 2024, the IRS contribution limit is $7,000 per year if you are under age 50, or $8,000 per year if you are 50 or older (the extra $1,000 is called a catch-up contribution). These limits apply to your combined Traditional and Roth IRA contributions, not each account separately. Contribution limits are also phased out at higher income levels, so high earners may be limited to a smaller amount or ineligible entirely.

Yes, qualified withdrawals from a Roth IRA are completely free of federal income tax, including all the investment growth. To be a qualified withdrawal, the account must have been open for at least 5 years and you must be at least 59½ years old (with some exceptions for first-time home purchases, disability, or other qualifying events). This is the core advantage of a Roth IRA — you pay tax on the money before it goes in, not on the way out.

Roth IRA growth is calculated using compound interest: your existing balance grows at your expected annual return rate, and each new contribution also compounds for the remaining years until retirement. The formula combines the future value of your current balance with the future value of a series of equal annual contributions (an ordinary annuity). Over long time horizons, this compounding effect can make contributions in your 20s and 30s dramatically more valuable than the same contributions made later.

A common assumption is 7% per year, which approximates the long-run historical average annual return of the S&P 500 after adjusting for inflation. Conservative planners sometimes use 5–6% to account for market downturns and lower future returns, while more aggressive all-stock portfolios have historically averaged closer to 9–10%. Since actual returns vary significantly year to year, it's wise to check your results using a range of rates rather than relying on a single estimate.

Yes, you can withdraw the amount you personally contributed to a Roth IRA at any time, for any reason, without taxes or penalties, since those contributions were already taxed. However, withdrawing investment earnings before age 59½ and before the account is 5 years old typically triggers both income tax and a 10% early withdrawal penalty, unless an exception applies. This flexibility on contributions is another reason many savers value the Roth IRA over other retirement accounts.

They serve different purposes and are not mutually exclusive — a 401(k) often comes with an employer match (which you should always capture first) and higher contribution limits, while a Roth IRA offers more investment flexibility and guaranteed tax-free withdrawals. Many savers use both: contributing enough to a 401(k) to get the full match, then maxing out a Roth IRA, then returning to the 401(k) if there's more to save. A Roth 401(k), where available, combines employer-plan features with Roth tax treatment.