Roth IRA Calculator

How a Roth IRA works

A Roth IRA is a retirement account with an unusual and powerful tax deal: you contribute money you've already paid tax on, and in exchange, everything it earns grows completely tax-free — and qualified withdrawals in retirement are tax-free too. You never pay tax on the growth, which over decades can be the large majority of the balance.

That's the magic the calculator shows. In the default example, you contribute $255,000 over 35 years but end with over $1 million — meaning more than $800,000 is growth you'd normally owe taxes on, but in a Roth you don't. The earlier you start, the more of your final balance comes from tax-free compounding rather than your own contributions.

A few rules that shape it: contributions are capped each year ($7,000 in 2025, or $8,000 if you're 50 or older, adjusted over time for inflation); your ability to contribute phases out at higher incomes; and to withdraw earnings tax-free, the account generally must be open at least five years and you must be at least 59½. You can always withdraw your own contributions tax- and penalty-free.

How we calculate it

We grow your balance one year at a time: apply your expected return, then add that year's contribution, and repeat until retirement. It's the future-value-of-a-growing-balance formula:

This is a simplified projection: it assumes a steady return every year and a fixed annual contribution. Real markets bounce around, and contribution limits change over time — so treat the result as an illustration of the power of compounding, not a guarantee.

Roth vs Traditional IRA

Both are great retirement accounts; the difference is when you pay the tax:

• Roth IRA — pay tax now (you contribute after-tax dollars), then withdraw everything tax-free in retirement.
• Traditional IRA — often deduct your contribution now (pre-tax), then pay income tax on withdrawals in retirement.

The "If Traditional, after tax" tile shows what the same ending balance would be worth in a Traditional IRA after paying your expected retirement tax rate — and the "Tax-free advantage" tile is the tax you avoid by using a Roth. One honest caveat: this comparison assumes the same contributions go into each account. In reality, a Traditional IRA also hands you a tax break today that you could invest, so the truly fair comparison hinges on one thing:

If you expect to be in the same or a higher tax bracket in retirement, the Roth usually wins. If you expect a lower bracket later, the Traditional can win. When in doubt, many people split the difference and hold both.

What grows your Roth IRA the most

• Time. The single biggest factor. Compounding is exponential, so an extra five or ten years early on can mean hundreds of thousands more at the end. Starting at 25 instead of 35 can roughly double your final balance.
• Consistent contributions. Maxing out (or getting close) every year matters far more than picking the perfect investment. Automating it removes the temptation to skip.
• Your return. A diversified, low-cost portfolio over decades has historically landed in the mid-single-digits to ~10% range; small differences in return compound into big differences over 30+ years.
• Not touching it. Every early withdrawal of earnings costs you taxes, possible penalties, and — worse — all the future tax-free growth that money would have earned.

Glossary

Roth IRA

An individual retirement account funded with after-tax money; growth and qualified withdrawals are tax-free.

Contribution limit

The most you can add per year ($7,000 in 2025, $8,000 if 50+), set by the IRS and adjusted for inflation.

Catch-up contribution

An extra amount people 50 and older can contribute on top of the standard limit.

MAGI (Modified Adjusted Gross Income)

The income figure used to decide whether — and how much — you can contribute to a Roth IRA.

Qualified withdrawal

A withdrawal that's fully tax-free: generally you must be 59½+ and have had the account at least five years.

Traditional IRA

A retirement account that's often tax-deductible now but taxed when you withdraw in retirement.

Compounding

Earning returns on your past returns, not just your contributions — the engine behind long-term growth.