How to Use the Roth IRA Calculator
A Roth IRA is one of the most powerful retirement savings tools available. Contributions are made with after-tax dollars, but all qualified withdrawals in retirement — including decades of investment gains — are completely tax-free.
Current Age — your age today. The earlier you start a Roth IRA, the more time your money has to grow tax-free.
Retirement Age — when you plan to start withdrawing funds. You can begin penalty-free withdrawals at age 59.5 if the account has been open for at least 5 years.
Current Balance — the amount already in your Roth IRA. If this is your first year, enter $0.
Annual Contribution — the amount you plan to contribute each year. The 2025 limit is $7,000 per year, or $8,000 if you are 50 or older. Contributing the maximum each year maximizes your tax-free growth.
Expected Return — the average annual return on your investments within the Roth IRA. With a diversified stock-heavy portfolio, 7% after inflation is a reasonable long-term estimate.
Tax Rate — your current marginal tax rate. This helps estimate how much you save compared to a taxable account, since Roth IRA gains are never taxed.
Roth IRA vs. Traditional IRA: Which Is Better?
Choosing between a Roth IRA and a Traditional IRA depends on your current and expected future tax situation:
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Tax on Contributions | After-tax (no deduction) | Pre-tax (tax deduction) |
| Tax on Withdrawals | Tax-free | Taxed as income |
| Required Minimum Distributions | None during owner's lifetime | Must begin at age 73 |
| Income Limits (2025) | $150K single / $236K married | No income limit (deductibility varies) |
| Early Withdrawal of Contributions | Penalty-free anytime | 10% penalty before 59.5 |
| Best For | Expect higher taxes in retirement | Expect lower taxes in retirement |
If you are young and in a lower tax bracket now, a Roth IRA is often the better choice. You pay taxes at your current low rate and let decades of gains grow completely tax-free. The tax savings compound dramatically over 30-40 years.
The Tax-Free Advantage Over Time
The true power of a Roth IRA becomes clear over long time horizons. Consider this comparison between a Roth IRA and a taxable investment account, both earning 7% annually with $7,000 annual contributions over 37 years (age 28 to 65):
- Total Contributions: $259,000
- Roth IRA Value at 65: approximately $1,140,000 — all withdrawals are tax-free
- Taxable Account Value at 65: approximately $920,000 after capital gains taxes on annual rebalancing
- Tax Savings: approximately $220,000 in avoided taxes over the life of the account
That $220,000 in tax savings represents money that stays in your pocket rather than going to the IRS. And because Roth IRAs have no required minimum distributions (RMDs), you can let the money continue growing tax-free for as long as you like — a huge advantage for estate planning and financial flexibility in retirement.