Roth IRA Calculator

What a Roth IRA is

A Roth IRA is an individual retirement account funded with after-tax dollars. Unlike a Traditional IRA, you get no upfront deduction — but in exchange the account grows tax-free and qualified withdrawals in retirement are completely free of federal income tax. Created by the Taxpayer Relief Act of 1997 and named after Senator William Roth, the Roth IRA has become one of the most flexible tax-advantaged accounts available to US savers.

How the math works

The calculator runs two parallel simulations year by year. Both start with the same balance, add the same annual contribution, and grow at the same rate. The Roth side compounds untouched. The taxable side has its annual gain reduced by your marginal tax rate to model the tax drag of dividends, interest and rebalancing-driven realised gains. At retirement age the Roth balance is yours, full stop; the taxable balance has already paid tax on its growth along the way, leaving less to compound.

The compact closed-form approximation for a Roth balance with level annual contributions is:

$$\mathrm{FV}=P·{(1+r)}^n+C·\frac{{(1+r)}^n-1}{r}$$

Where P is the starting balance, C the annual contribution, r the annual return, and n the number of years until retirement. The taxable comparison uses the same formula with r replaced by r × (1 − t) where t is the marginal tax rate.

Contribution rules

Three rules shape who can put money into a Roth IRA and how much. First, you (or your spouse if filing jointly) must have earned income at least equal to the contribution. Second, the annual dollar cap is set by the IRS; this calculator stores both the under-50 and 50-plus catch-up amounts in CONFIG and updates them each year. Third, modified adjusted gross income (MAGI) phases out direct contributions for higher earners — single filers and married-filing-jointly filers have different thresholds, both stored in CONFIG. The contribution deadline for any tax year is the federal tax filing deadline of the following April, giving you a built-in late window.

Contribution limits by age (as of the current tax year)

The base annual limit applies to anyone under 50. Beginning the calendar year you turn 50 you can add a catch-up contribution on top. The total — base plus catch-up — is the figure auto-filled when you toggle "Maximise contributions." Both numbers are taken from the CONFIG block at the top of this calculator's script; we do not hard-code year-specific values into the prose so the page stays accurate over time.

Income limits

Direct contributions phase out within a MAGI band that differs by filing status. Below the lower threshold you can contribute the full limit; between the two thresholds your allowable contribution scales down linearly; above the upper threshold direct Roth contributions are disallowed. The exact band is in the CONFIG object — separate values for single and married-filing-jointly. High earners who exceed the upper threshold often use a "backdoor Roth" strategy described below.

Distribution rules — contributions vs earnings

The single most important Roth feature: direct contributions can be withdrawn at any age, for any reason, with no tax and no penalty. Only earnings (and converted amounts, separately) are subject to the rules. To take earnings out tax-free, both of the following must be true:

• The account has been open at least 5 tax years (the "5-year rule"). The clock starts January 1 of the year of your first Roth contribution.
• You are at least 59½, or you meet a qualifying exception.

If you withdraw earnings before satisfying both rules you owe ordinary income tax on the earnings plus a 10% early-withdrawal penalty (unless an exception applies).

Penalty exceptions for early earnings withdrawals

• Total and permanent disability of the account holder.
• First-home purchase — up to $10,000 lifetime, for the purchase or build of a primary residence.
• Qualified higher education expenses for you, your spouse, your children, or grandchildren.
• Unreimbursed medical expenses above 7.5% of adjusted gross income.
• Health insurance premiums while unemployed, after receiving unemployment for 12+ weeks.
• Birth or adoption — up to a capped amount per child.
• Substantially Equal Periodic Payments (Rule 72(t)).
• Death of the account holder — beneficiaries take penalty-free withdrawals.

No RMD: a structural advantage

Roth IRAs have no Required Minimum Distributions during the original owner's lifetime. Traditional IRAs and 401(k)s force taxable income out beginning at age 73, often pushing retirees into higher brackets they did not plan for. With a Roth, you control when (or whether) the money comes out — you can leave it growing tax-free for thirty years or pass it intact to heirs.

Pros of a Roth IRA

• Tax-free withdrawals. Every dollar of growth comes out tax-free if rules are met — uniquely valuable at long horizons.
• Liquidity of contributions. Direct contributions can be withdrawn at any time for any reason. The Roth doubles as a flexible emergency reserve.
• Investment freedom. Unlike most 401(k) plans, a Roth IRA at a broker gives access to virtually any stock, ETF or mutual fund.
• Excluded from FAFSA. Retirement accounts including Roth IRAs are not counted as parental assets for federal student-aid purposes.
• Heir-friendly. Beneficiaries inherit the account income-tax-free; though they must drain it within 10 years under current rules, those 10 years remain tax-free.
• Tax diversification. Holding both Traditional and Roth balances gives you a lever to control taxable income year by year in retirement.
• No RMDs. Discussed above.

Cons of a Roth IRA

• After-tax dollars only. No upfront deduction means a real out-of-pocket cost today.
• Low contribution limit. The annual Roth IRA cap is a small fraction of the 401(k) limit; building a meaningful balance takes decades.
• Income limit. High earners can't contribute directly.
• No immediate tax reduction. If you need to lower taxable income this year, the Traditional side helps; the Roth doesn't.
• 5-year holding period. Earnings withdrawals before five years of ownership are taxed even at age 59½.
• Not ideal for charitable giving in retirement. Qualified Charitable Distributions reduce taxable RMDs from Traditional IRAs but Roths have no RMDs to offset.

Converting Traditional to Roth

A Roth conversion moves money from a pre-tax Traditional IRA or 401(k) into a Roth IRA. The converted amount is taxed as ordinary income in the year of conversion; from then on it grows tax-free under Roth rules. Three mechanical methods:

• Same-trustee transfer. Easiest: the same custodian moves dollars from your Traditional account to a Roth at the same firm.
• Trustee-to-trustee transfer. Different custodians; the funds never touch your bank account. No withholding.
• 60-day rollover. You receive a distribution and have 60 days to deposit it into the Roth. The IRS will typically withhold 20% upfront, which you have to make up from other money to convert the full amount.

When to convert. Convert in a low-income year (between jobs, early retirement before Social Security kicks in, or during a market drawdown when balances are temporarily lower). Avoid converting if the tax bill would push you into a sharply higher bracket or trigger Medicare IRMAA surcharges.

Backdoor Roth strategy

For high earners above the MAGI ceiling, the backdoor Roth is a two-step workaround: contribute to a Traditional IRA non-deductibly, then convert that balance to a Roth shortly after. There is no income limit on conversions, so the strategy is legal and explicitly acknowledged by the IRS. Watch the pro-rata rule: conversions are taxed proportionally across all your pre-tax and after-tax IRA balances combined. If you already have a large pre-tax IRA from a 401(k) rollover, the conversion creates a real tax bill. One common fix is to first roll the pre-tax IRA back into an active 401(k), leaving only the new non-deductible Traditional contribution to convert cleanly.

Roth vs Traditional decision tree

Use this branching framework, top to bottom:

1. Are you in a low tax bracket today (12% or below)? If yes → Roth. You're paying tax at one of the lowest rates of your life; lock it in.
2. Will your retirement bracket be higher than today's? If yes → Roth. The deduction value will be smaller than the future withdrawal tax.
3. Will your retirement bracket be lower than today's? If yes → Traditional. Defer at today's high rate, withdraw at tomorrow's low rate.
4. Uncertain about future rates? Split — contribute to both. Tax diversification is its own form of risk management.
5. Already have lots of pre-tax money? Lean Roth on new contributions to build tax-free balance for RMD planning later.
6. High earner above the MAGI limit? Use a backdoor Roth (above) or a mega-backdoor inside your 401(k) if the plan allows after-tax contributions.

Roth 401(k) versus Roth IRA

Both use after-tax dollars and offer tax-free qualified withdrawals, but the differences matter. The Roth 401(k) has a much higher annual contribution limit, no income cap on participation, and is funded by payroll deferral (sometimes with an employer match — though any match dollars sit in a pre-tax bucket). The Roth IRA has a far lower limit but offers unlimited investment choice, lets you withdraw contributions anytime with no penalty, and has no RMDs even at 73. Many savers use both, contributing enough to the Roth 401(k) to capture the full employer match, then funnelling additional savings into a Roth IRA for its flexibility. See the 401(k) calculator for the workplace side.

Edge cases

• Phase-out range. If your MAGI sits between the lower and upper thresholds, your contribution is reduced — not eliminated — pro rata. The IRS publishes the exact formula in Publication 590-A.
• Spousal contributions. A non-working spouse can contribute to their own Roth IRA based on the working spouse's earned income, doubling the household's annual Roth capacity.
• Excess contribution. Contribute more than you're allowed and the IRS charges 6% per year on the excess until removed. Withdraw the excess (and any earnings on it) before the tax filing deadline to avoid the penalty.
• Conversion 5-year rule. Each conversion starts its own 5-year clock for the converted dollars — separate from the regular Roth 5-year rule for earnings.
• Estate planning. Inherited Roth IRAs are tax-free to beneficiaries but most non-spouse heirs must empty the account within 10 years under post-SECURE Act rules.

What to do with the result

• Automate the contribution. Set up monthly transfers totalling the annual limit; even split, monthly contributions smooth dollar-cost averaging.
• Front-load if you can. Contributing the full limit in January rather than December gives an extra eleven months of tax-free compounding per year — small individually, large over decades.
• Use the Roth as the equity sleeve. Since growth comes out tax-free, hold your highest-expected-return assets (broad-market stock index funds) here and put bonds elsewhere.
• Consider a backdoor Roth. If you're above the income cap, the backdoor route is the most efficient way to keep building Roth dollars.
• Plan conversions strategically. Roth conversion ladders during low-income years (gap years before Social Security, sabbaticals) can move significant pre-tax wealth into Roth at low marginal cost.

Related tools

Use the IRA calculator for the Traditional IRA side, the 401(k) calculator for the workplace plan, and the retirement calculator for an integrated nest-egg-plus-withdrawal projection.