💰 Roth IRA Calculator

📖 What Is a Roth IRA?

A Roth IRA (Individual Retirement Arrangement) is a retirement savings account that offers tax-free growth and tax-free withdrawals in retirement. It was established by the Taxpayer Relief Act of 1997 and named after Senator William Roth.

The key difference between a Roth IRA and a Traditional IRA is how taxes are handled:

• Traditional IRA: Contributions may be tax-deductible now, but withdrawals in retirement are taxed as ordinary income.
• Roth IRA: Contributions are made with after-tax dollars, but qualified withdrawals in retirement are completely tax-free.

Who Should Consider a Roth IRA?

Roth IRAs are especially beneficial for:

• Young professionals who expect to be in a higher tax bracket later in life.
• People who want tax diversification in retirement (mixing taxable, tax-deferred, and tax-free accounts).
• Anyone who values the flexibility of withdrawing contributions at any time without penalty.
• Those who want to leave tax-free inheritance to heirs.

Roth IRA Contribution Limits (2026)

• Under 50: $7,500 per year
• 50 and older: $8,600 per year (includes catch-up contribution)
• Contributions for a tax year can be made until the tax filing deadline in April of the following year.

Income Limits (2026)

Not everyone can contribute directly to a Roth IRA. For 2026:

• Single / Head of Household: Phase-out begins at $168,000 adjusted gross income (AGI).
• Married Filing Jointly: Phase-out begins at $252,000 AGI.
• You must have earned income (wages, salaries, tips, self-employment income) to contribute.

Withdrawal Rules & The 5-Year Rule

• Direct contributions can be withdrawn tax-free and penalty-free at any time.
• Earnings can be withdrawn tax-free and penalty-free only after age 59½ AND the account has been open for at least 5 years.
• Early withdrawal of earnings (before 59½) is subject to income tax and a 10% penalty, with some exceptions:
  • First-time home purchase (up to $10,000 lifetime max)
  • Qualified education expenses
  • Unreimbursed medical expenses exceeding 7.5% of AGI
  • Health insurance premiums during unemployment
  • Disability
  • Distribution to beneficiaries after the account holder's death
• No Required Minimum Distributions (RMDs) — unlike Traditional IRAs and 401(k)s, Roth IRAs never force you to withdraw money.

Pros of a Roth IRA

• Tax-free retirement income: Withdrawals in retirement are not taxed.
• Flexible access to contributions: Withdraw your contributions anytime, tax-free and penalty-free.
• No RMDs: Your money can grow tax-free for as long as you want.
• Heir-friendly: Inherited Roth IRAs continue to grow tax-free for beneficiaries.
• Not reported on FAFSA: Doesn't reduce federal student aid eligibility for your children.
• Tax diversification: Combine with 401(k)s and Traditional IRAs to manage taxes in retirement.
• Wide investment options: Stocks, bonds, ETFs, mutual funds, CDs, and more.

Cons of a Roth IRA

• No upfront tax deduction: Contributions are made with after-tax dollars.
• Low contribution limit: $7,500/year vs. $24,500 for 401(k)s (2026 figures).
• Income limits: High earners can't contribute directly (though backdoor Roth conversions are possible).
• 5-year rule: Earnings can't be withdrawn tax-free until the account matures 5 years.
• Not ideal for charitable giving: Charities are tax-exempt, so tax-deferred accounts are better for donations.

Roth IRA vs. Traditional IRA — Quick Comparison

• Contributions: Roth = after-tax; Traditional = pre-tax (may be deductible).
• Growth: Both grow tax-deferred; Roth withdrawals are tax-free.
• Withdrawals: Roth = tax-free after 59½ + 5 years; Traditional = taxed as ordinary income.
• RMDs: Roth = none; Traditional = required starting at age 73 (or 75 for some).
• Income limits: Roth = yes; Traditional = no (but deductibility may be limited).

Backdoor Roth IRA Conversion

If your income exceeds the Roth IRA limits, you can still contribute indirectly using a backdoor Roth IRA:

• Contribute to a Traditional IRA (non-deductible).
• Convert the Traditional IRA to a Roth IRA.
• There are no income limits on conversions.
• You'll owe income tax on any pre-tax amounts converted.

This strategy is popular among high-income earners, but beware of the pro-rata rule if you have other pre-tax IRA balances.

How This Calculator Works

This calculator compares two scenarios side by side over your working years:

• Roth IRA: Contributions grow tax-free. No taxes are paid on growth or withdrawals. The full balance at retirement is yours.
• Taxable Account: Contributions grow, but the annual investment returns are taxed at your marginal rate. This reduces the effective compounding rate and results in a lower balance at retirement.

The difference between the two balances represents your tax savings from using a Roth IRA instead of a regular taxable brokerage account.

Assumptions & Limitations

• Returns are compounded annually.
• Taxes on the taxable account are applied to the annual investment gain.
• Contribution limits are not enforced by the calculator — enter realistic values.
• Inflation is not factored in (all figures are in nominal dollars).
• This tool is for educational purposes only and does not constitute financial, tax, or investment advice.

Frequently Asked Questions

Q: Can I contribute to both a Roth IRA and a 401(k)?
Yes. The Roth IRA limit is separate from the 401(k) limit. In 2026, you can contribute up to $7,500 to a Roth IRA and up to $24,500 to a 401(k) (if under 50).

Q: What happens if I withdraw Roth IRA earnings early?
Earnings withdrawn before age 59½ and before the 5-year rule are subject to income tax and a 10% penalty, unless an exception applies (first home, education, disability, etc.).

Q: Can I convert my Traditional IRA to a Roth IRA?
Yes. There are no income limits on conversions. You'll owe income tax on the pre-tax portion converted. This is often called a "backdoor Roth IRA."

Q: Is the Roth IRA better than a Traditional IRA?
It depends on your tax situation. If you expect higher taxes in retirement, Roth is better. If you expect lower taxes, Traditional may be better. Many people use both for tax diversification.

Q: Do I have to be 59½ to withdraw my contributions?
No. Your direct contributions can be withdrawn at any time, tax-free and penalty-free, regardless of age. Only earnings are subject to the 59½ rule.