Finance
Roth IRA Calculator
Project tax-free retirement savings growth in a Roth IRA
FAQs
How does a Roth IRA grow?
You contribute after-tax dollars, which then grow tax-free. Qualified withdrawals in retirement (age 59½ and after a 5-year holding period) are completely tax-free, including all investment gains.
How much can I contribute to a Roth IRA?
Annual contribution limits are set by the IRS and adjusted periodically; people age 50 and older can make additional catch-up contributions. Eligibility also phases out at higher income levels.
What return rate should I assume?
A common long-term assumption for a diversified stock portfolio is around 6–8% annually before inflation. Actual returns vary year to year, so treat the projection as an estimate.
Is a Roth IRA better than a traditional IRA?
It depends on whether you expect to be in a higher tax bracket in retirement. Roth IRAs are often favored by younger savers who expect their income (and tax rate) to rise over time.
How to Use the Roth IRA Calculator
Project how much your Roth IRA could be worth at retirement, and see how much of that balance comes from your own contributions versus tax-free investment growth.
- Enter your current Roth IRA balance (use 0 if you're just starting).
- Enter the amount you plan to contribute each year.
- Enter your current age and the age you plan to retire.
- Enter an expected average annual return (6–8% is a common long-term assumption).
- Review your projected balance at retirement, total contributions, and total growth.
Roth IRA Growth Formula
A Roth IRA grows through annual contributions that compound tax-free. This calculator models contributions made at the start of each year (an annuity due).
Future Value of Annual Contributions
Where C is the annual contribution, r is the annual return rate, and n is the number of years until retirement. The trailing (1 + r) reflects contributing at the start of each year.
Example:
Input: C = $7,000, r = 7%, n = 35 years
Calculation: 7,000 × (((1.07³⁵) − 1) / 0.07) × 1.07
Result: ≈ $1,036,000 (excluding any starting balance)
Growth of a Starting Balance
Any existing balance P compounds on its own at rate r for n years, on top of the future value of your contributions.
Example:
Input: P = $5,000, r = 7%, n = 35
Calculation: 5,000 × 1.07³⁵
Result: ≈ $53,400
Total Growth
Because Roth contributions are made with after-tax money, qualified withdrawals (including this growth) are tax-free in retirement.
Example:
Input: FV ≈ $1,089,000, contributions = $250,000
Calculation: $1,089,000 − $250,000
Result: ≈ $839,000 tax-free growth
Real-World Use Cases
A Roth IRA projection helps you decide how much to save and understand the long-term power of tax-free compounding.
Starting Early
See how decades of compounding turn modest contributions into a large tax-free nest egg.
Example: Contributing $7,000/year from age 25 to 65 at 7% can grow to well over $1.4M
Catch-Up Saving
Model larger contributions later in your career to gauge whether you're on track.
Example: Estimate the impact of catch-up contributions starting at age 50
Roth vs. Traditional
Compare the tax-free Roth outcome against a traditional IRA when deciding which to fund.
Example: Weigh tax-free withdrawals now vs. an upfront tax deduction
Tips & Common Mistakes
Tips
- Contribute consistently — automatic monthly transfers smooth out market timing.
- Check the annual IRS contribution limit and income eligibility each year.
- Treat the projected return as an estimate; real markets are volatile year to year.
Common Mistakes to Avoid
- Assuming an unrealistically high return rate inflates the projection.
- Forgetting that Roth eligibility phases out at higher incomes.
- Withdrawing earnings before age 59½ (and the 5-year rule), which can trigger taxes and penalties.