Roth IRA Calculator

A Roth IRA is a retirement account funded with after-tax dollars. You don’t get a tax deduction the year you contribute, but in exchange, every dollar you withdraw in retirement — including decades of investment growth — is 100% tax-freeas long as you follow the rules (age 59½+ and the account is at least 5 years old).

Compare that to a Traditional IRA or pre-tax 401(k), where every withdrawal is taxed as ordinary income. If you contribute $7,000/year from age 30 to 65 at a 7% return, you’ll end up with roughly $970,000 in a Roth — all of it yours to spend. In a Traditional account, that same balance would owe taxes on every withdrawal, potentially reducing your take-home by 20–30% or more depending on your retirement tax bracket.

The break-even between Roth and Traditional depends almost entirely on tax rates — yours today vs. yours in retirement. The Roth wins when:

• You’re early in your career and expect higher income later
• You expect federal tax rates to be higher decades from now
• You want to avoid RMDs and keep the money compounding indefinitely
• You want flexibility — contributions are always accessible without penalty

Traditional tends to win when your current marginal tax rate is meaningfully higher than what you expect in retirement — think peak-earnings years in the 32%+ federal bracket where the up-front deduction is worth more than the tax-free growth.

Maxing the Roth at $7,000/year from age 30 to 60 at a 7% annualized return produces roughly $680,000in tax-free retirement money — from just $210,000 of contributions. Stretch it to age 65 and the balance is closer to $970,000. The reason the last decade matters so much: the same dollar contributed at age 30 doubles roughly 3.5 times by age 65 at 7%, while a dollar contributed at age 55 only doubles once.

The earlier the contribution, the more time it has to compound tax-free. That’s why financial planners often say: the Roth IRA is the single best account a young earner can fund. You’re likely in a lower tax bracket now than you will be later, and every dollar you put in today will compound for 30+ years without the IRS ever taking another cut.

• Leaving the cash uninvested.Funding the account is only step one — you also have to actually buy investments. A surprising number of Roth IRAs sit in money-market funds earning 4–5% instead of long-term market returns.
• Missing the deadline.You can contribute for a given tax year all the way until that year’s tax filing deadline (typically April 15 of the following year). Don’t let a year slip by — the contribution room is use-it-or-lose-it.
• Over-contributing.If you exceed the IRS limit, you owe a 6% excise tax on the excess every year until it’s withdrawn. Watch the cap, especially if your income approaches the phase-out zone mid-year.
• Not knowing about the Backdoor Roth. If your income is above the phase-out, you can still get money into a Roth via a Traditional IRA contribution followed by a Roth conversion — perfectly legal and widely used.