Roth IRA Calculator
Calculate your Roth IRA growth with tax-free withdrawals in retirement. See how after-tax contributions grow over time and compare with traditional IRA options.
Roth IRA Results
Annual Summary
Tax Comparison
Understanding Roth IRAs
A Roth IRA is a retirement savings account that offers tax-free growth and tax-free withdrawals in retirement. Contributions are made with after-tax dollars, but qualified withdrawals are completely tax-free.
Roth IRA vs Traditional IRA
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Tax Treatment | After-tax contributions, tax-free withdrawals | Pre-tax contributions, taxable withdrawals |
| Current Tax Benefit | No current deduction | Current tax deduction |
| Required Minimum Distributions | No RMDs during lifetime | RMDs required at age 73 |
| Income Limits | Modified AGI limits for contributions | No income limits for contributions |
| Best For | Higher future tax rates | Lower future tax rates |
Contribution Limits
Roth IRA contribution limits are set by the IRS and adjusted annually for inflation.
- 2024 Contribution Limit: $7,000 (plus $1,000 catch-up if age 50+)
- Income Limits (2024): Phase out begins at $146,000 (single) or $230,000 (married filing jointly)
- Backdoor Roth IRA: Option for high-income earners to contribute indirectly
Qualified Withdrawals
- 5-Year Rule: Account must be open for 5 years for earnings to be tax-free
- Age 59½ Rule: Withdrawals before this age may incur penalties
- First-Time Home Purchase: Up to $10,000 penalty-free for qualified home purchase
- Qualified Education Expenses: Penalty-free withdrawals for higher education
- Disability: Penalty-free withdrawals if permanently disabled
Investment Options
Roth IRAs offer a wide range of investment choices:
- Stocks and Bonds: Individual securities or ETFs
- Mutual Funds: Actively or passively managed funds
- Target Date Funds: Automatically adjust asset allocation
- Certificates of Deposit: Low-risk, guaranteed returns
- Real Estate: Through REITs or self-directed accounts
Tax Diversification Strategy
Many financial advisors recommend holding both Roth and Traditional accounts for tax diversification in retirement.
- Tax-Free Income: Roth withdrawals provide tax-free income
- Required Minimum Distributions: Traditional accounts require withdrawals
- Estate Planning: Roth IRAs can be inherited tax-free
- Market Timing: Flexibility to withdraw from favorable accounts
Pro Tip: Roth IRAs are particularly beneficial if you expect to be in a higher tax bracket in retirement or want to avoid RMDs. Consider converting Traditional IRA funds to Roth IRA (Roth conversion) when in a low tax year to reduce future tax burdens.