Understanding Roth IRA
A Roth IRA lets you contribute after-tax dollars that grow tax-free. Qualified withdrawals in retirement are completely tax-free.
2025 Roth IRA Limits
| Category | Limit |
|---|---|
| Under 50 | $7,000/year |
| 50 and older | $8,000/year |
| Income limit (single) | $161,000 MAGI |
| Income limit (married) | $240,000 MAGI |
Roth vs Traditional IRA
Roth: Pay taxes now, withdraw tax-free. Traditional: Deduct now, pay taxes on withdrawals. Roth wins if your future tax rate is higher.
How to Use This Roth IRA Calculator
Enter your current age, annual contribution, expected return rate, and current balance. The calculator projects your Roth IRA growth and tax-free retirement income.
Formula & How It Works
Future Value = Current Balance Γ (1+r)^n + Annual Contribution Γ [(1+r)^n β 1] / r. All growth and qualified withdrawals after age 59Β½ are tax-free.
Calculation Example
Age 30, $7,000/year (2026 max), 8% return, $5,000 starting balance: by age 65 = $1,174,000 β all tax-free in retirement.
Expert Tips
Max out your Roth IRA every year if eligible. Income limits apply ($161K single, $240K married in 2026). Use backdoor Roth conversion if over the income limit. Start as early as possible β tax-free compounding is incredibly powerful.
Frequently Asked Questions
Can I withdraw contributions early?
Yes. Roth IRA contributions can be withdrawn any time, tax-free and penalty-free. Earnings before 59½ may face taxes and a 10% penalty.
What is the backdoor Roth IRA?
If your income exceeds limits, contribute to a Traditional IRA and convert to Roth. This is legal and commonly used by high-income earners.
Is there a required minimum distribution?
No. Roth IRAs have no RMDs during the owner's lifetime, making them excellent for estate planning.