A Roth IRA is the rare retirement account where you pay the tax bill up front and then never owe another dime on the growth — as long as you follow the rules. That tax-free withdrawal angle is what separates it from a Traditional IRA, a 401(k), or any other pre-tax account: with those, every dollar you take out in retirement is taxed as ordinary income, and a long investing career can turn that future tax bill into a six-figure number.
This calculator projects exactly how much tax-free wealth you can build in a Roth IRA. Enter your annual contribution, your expected return, and the years ahead of you, and the result card shows your ending balance, the pure tax-free growth (the earnings), and — most importantly — the estimated tax you avoid compared with putting the same money into a Traditional IRA at your expected retirement rate.
How to Use
- Set the Annual Roth Contribution. In 2025 the IRS limit is $7,000 if you are under 50 and $8,000 if you are 50 or older. Enter the amount you actually expect to add each year, not the maximum.
- Fill in your Current Roth Balance if you already hold a Roth IRA. This money compounds from year one, so leaving it at zero will understate the outcome.
- Choose an Expected Annual Return. A long-run balanced portfolio (roughly 80% stocks / 20% bonds) averages about 7% after inflation in real terms, or 9%–10% nominally. The default of 7% is a reasonable middle case; stress-test 5% and 9% to see the range.
- Enter the Years Until Retirement. If you are 35 and plan to retire at 65, that is 30 years — the period during which every year of contributions compounds.
- Optionally set your Expected Retirement Tax Rate. This is the marginal ordinary-income bracket you expect to pay when you withdraw. The default 22% is a common middle class rate; retirees in higher-tax states may want 24%–32%.
The engine compounds end-of-year contributions using the future-value-of-an-ordinary-annuity formula: FV = PV × (1 + r)ⁿ + PMT × ((1 + r)ⁿ − 1) / r. The result card then compares that Roth balance against the same dollars grown inside a Traditional IRA. Because Roth withdrawals are tax-free and Traditional withdrawals are not, the difference — ending balance × your retirement tax rate — is the dollar value of choosing Roth.
Examples
Example 1 — The default 30-year saver. A 35-year-old contributes $7,000 per year for 30 years at a 7% annual return. Total contributions are $210,000. The projected ending balance is about $661,226, of which roughly $451,226 is tax-free earnings. At a 22% retirement tax rate, that same balance inside a Traditional IRA would have created a tax bill of roughly $145,470 — money the Roth saver keeps entirely.
Example 2 — Starting from an existing balance. A 45-year-old already has $120,000 in a Roth IRA and adds $7,000 per year for 20 years at 7%. The existing $120,000 alone grows to about $464,000, and the new contributions add roughly $303,000, for a total near $767,000. Notice how the existing balance contributes far more than the new money — which is why rolling old pre-tax funds into a Roth (a Roth conversion) can be so powerful in low-income years.
Example 3 — Big contribution, long horizon. A high earner maxes out at $50,000 per year (using backdoor and spousal strategies) for 30 years at 7%. Total contributions are $1,500,000, but the projected balance is over $4,700,000, with roughly $3,200,000 of tax-free growth. At a 22% retirement rate the tax avoided approaches $1,040,000 — enough to fund several years of retirement on its own.
Example 4 — The zero-rate stress case. If your expected return is 0% (for example, holding cash inside the Roth), the ending balance equals your total contributions — $210,000 on $7,000 over 30 years. This is the floor: even with no investment growth, the Roth still shelters whatever growth you do eventually earn, and it still avoids forced Required Minimum Distributions in retirement.
Why a Roth Beats a 401(k) for Many Savers
A traditional 401(k) and a pre-tax Traditional IRA are tax-deferred: you get a deduction today, but every dollar withdrawn after age 59½ is taxed at your ordinary income rate. A Roth IRA flips that: no deduction today, but qualified withdrawals — both contributions and earnings — are 100% tax-free after age 59½ and a five-year holding period.
Three practical consequences follow. First, if you expect your tax rate in retirement to be the same or higher than today, the Roth almost always wins. Second, Roth IRAs have no Required Minimum Distributions during the original owner's lifetime, so you can leave the money growing tax-free for decades and pass it to heirs (who still get tax-free withdrawals over a 10-year window under current rules). Third, Roth contributions can be withdrawn at any time, for any reason, with no penalty or tax — giving you a flexibility that a 401(k) cannot match until retirement.
FAQ
How much can I contribute to a Roth IRA in 2025?
The 2025 contribution limit is $7,000 if you are under 50, or $8,000 if you are 50 or older. There are also income limits: in 2025, single filers with modified AGI over about $150,000 and joint filers over about $230,000 begin to see the limit phase out. Above those thresholds, a backdoor Roth (non-deductible Traditional IRA contribution followed by a Roth conversion) is the standard workaround.
When can I withdraw money from a Roth IRA without tax or penalty?
Qualified withdrawals require two conditions: you must be at least 59½ years old, and the account must have been open for at least five tax years. Contributions (your own after-tax money) can always be withdrawn tax-free and penalty-free at any age; only the earnings are subject to the age and five-year rules.
Is a Roth IRA better than a 401(k)?
It depends on your tax bracket today versus your expected bracket in retirement. If your current bracket is lower than your expected retirement bracket, the Roth is usually better, because you lock in today's low rate. If you are in a very high bracket now and expect a much lower one later, the traditional 401(k) deduction can be worth more. Many people contribute to both — up to the 401(k) match, then to a Roth IRA for the tax-free growth.
What is the five-year rule for Roth IRA conversions?
Each conversion starts its own five-year clock. If you convert traditional IRA dollars to Roth and then withdraw the converted amount before 59½, the taxable portion of the conversion is subject to a 10% early-withdrawal penalty until five years have passed. The five-year rule applies per conversion, not per account.
How is Roth growth taxed in retirement?
It is not. After age 59½ and the five-year holding period, qualified withdrawals — contributions, conversions that have aged, and all investment earnings — come out completely federal-tax-free, and in most states state-tax-free too. That is the core advantage this calculator quantifies: the ending balance is what you keep, not what you owe tax on.
Can I lose money in a Roth IRA?
Yes. The Roth is a container, not an investment. Inside it you can hold stocks, bonds, CDs, or mutual funds, and those investments can decline in value. The tax advantage applies to whatever growth you do earn; if the account falls, you have the same downside as a taxable account, with the tax-loss harvesting benefit being weaker inside a retirement wrapper.
Disclaimer
This Roth IRA calculator is provided for informational purposes only and does not constitute financial, tax, investment, or legal advice. Projections use the future-value-of-an-ordinary-annuity formula and assume a constant annual return, constant contribution, and end-of-year deposits; actual market returns are variable, IRS contribution and income limits change annually, and tax laws are subject to revision. Always confirm your personal contribution eligibility, conversion timing, and withdrawal strategy with a qualified tax or financial professional before acting.