Roth IRA Calculator

A Roth IRA offers tax-free growth and withdrawals in retirement, making it one of the most powerful wealth-building tools for long-term investors. Unlike traditional IRAs that provide upfront tax deductions but taxable withdrawals, Roth IRAs use after-tax contributions that never face taxation again, including all investment gains accumulated over decades. Understanding contribution limits, income restrictions, the backdoor Roth strategy, Roth versus traditional comparisons, and withdrawal rules helps you maximize this exceptional retirement vehicle.

Roth vs Traditional IRA Decision

Choose Roth contributions if you're currently in a relatively low tax bracket (12 or 22 percent) and expect to be in similar or higher brackets in retirement, or if you're young with decades for tax-free growth to compound. Paying taxes now at low rates locks in tax-free treatment of potentially enormous future balances. Contributing $7,000 annually from age 25 to 65 at 7 percent returns accumulates approximately $1.5 million—all tax-free in a Roth.

Traditional IRA contributions make more sense if you're currently in high tax brackets (32 percent or above) and expect to be in lower brackets in retirement, providing valuable upfront tax deductions. Someone in the 35 percent bracket saving $7,000 in taxes this year through a traditional IRA contribution might pay only 22 percent taxes when withdrawing that money and its growth in retirement, creating a net tax arbitrage.

Consider Roth contributions for tax diversification even if traditional contributions seem mathematically superior. Having both traditional pre-tax and Roth after-tax retirement accounts provides flexibility in retirement to optimize tax efficiency based on annual income, tax law changes, and personal circumstances. You can strategically draw from each account type to manage your tax bracket.

Roth IRAs don't have required minimum distributions during the owner's lifetime, unlike traditional IRAs requiring RMDs starting at age 73. This allows leaving money in your Roth IRA to continue growing tax-free indefinitely, making Roth IRAs superior wealth transfer vehicles. Traditional IRA RMDs force withdrawals you might not need, potentially pushing you into higher tax brackets and triggering Medicare premium surcharges.

Estate Planning and Inheritance

Roth IRAs are exceptional estate planning tools because they don't require RMDs during the owner's lifetime, allowing maximum tax-free growth before inheritance. You can leave your entire Roth IRA untouched, letting it grow tax-free for decades, then pass it to heirs who inherit the tax-free treatment. Traditional IRAs force RMDs during your life, depleting the account before inheritance.

The SECURE Act changed inherited IRA rules significantly, generally requiring non-spouse beneficiaries to deplete inherited retirement accounts within 10 years rather than stretching distributions over their lifetimes. However, inherited Roth IRAs remain tax-free throughout the 10-year withdrawal period, while inherited traditional IRAs trigger ordinary income taxes on all distributions.

An inherited $500,000 Roth IRA can grow tax-free for 10 years while the beneficiary takes strategic withdrawals to stay in low tax brackets, perhaps accumulating to $700,000 before full distribution—all tax-free. An inherited $500,000 traditional IRA generates ordinary income taxes on every distribution, potentially costing the beneficiary $150,000 to $200,000 in taxes depending on their bracket.

Spouses who inherit Roth IRAs can treat them as their own, avoiding the 10-year depletion rule and continuing tax-free growth indefinitely. This spousal exception provides maximum flexibility for married couples to use Roth IRAs as long-term wealth transfer vehicles across generations.

Income Limits and Eligibility

Roth IRA contributions phase out at modified adjusted gross income levels of $146,000 to $161,000 for single filers and $230,000 to $240,000 for married couples filing jointly in 2024. These limits adjust annually for inflation. If your income falls below the phase-out range, you can contribute the full amount. Within the phase-out range, your allowed contribution gradually decreases until you're completely ineligible at the upper threshold.

Calculate your modified AGI by starting with your AGI from your tax return and adding back certain deductions like student loan interest, tuition deductions, and foreign earned income exclusions. For most people, modified AGI equals their regular AGI. If your income approaches the phase-out range, strategic moves like maximizing pre-tax 401(k) contributions to reduce AGI might keep you eligible for Roth contributions.

High earners above income limits still have Roth IRA access through the backdoor Roth strategy. You contribute to a non-deductible traditional IRA (which has no income limits), then immediately convert it to a Roth IRA. The conversion triggers taxes only on any earnings between contribution and conversion, which are minimal if done quickly. This legal workaround provides Roth access regardless of income.

Both spouses in a married couple can contribute to separate Roth IRAs even if only one spouse works, as long as the working spouse earns at least as much as the combined contributions. A working spouse earning $80,000 can fund both their own $7,000 Roth contribution and their non-working spouse's $7,000 Roth contribution, building retirement savings for both despite only one income.

Withdrawal Rules and Flexibility

Roth IRA contribution withdrawals are tax and penalty-free at any time since you already paid taxes on contributed amounts. This provides flexibility traditional IRAs lack—if you need money for emergencies, you can withdraw what you've contributed without taxes or penalties. Only earnings face restrictions and potential penalties for early withdrawal.

Qualified distributions—those taken after age 59.5 and meeting the 5-year rule—are completely tax and penalty-free including all earnings. The 5-year rule requires your first Roth contribution to have occurred at least 5 years ago. If you make your first Roth contribution at age 57, you must wait until 62 for fully qualified distributions, even though you're over 59.5.

Roth conversions have their own 5-year clocks starting from the year of conversion. Each conversion amount must age 5 years before withdrawal without penalty, even if you're over 59.5. This prevents people from using Roth conversions to access traditional IRA funds early while avoiding the 10 percent early withdrawal penalty.

Exceptions allow early withdrawal of Roth earnings without penalty for first-time home purchases up to $10,000, qualified education expenses, disability, death, and substantially equal periodic payments. These exceptions provide access to Roth funds for major life events without the devastating penalty costs, though taxes may still apply to earnings if under 59.5.

Contribution Limits and Deadlines

The 2024 Roth IRA contribution limit is $7,000 for individuals under 50, with an additional $1,000 catch-up contribution for those 50 and older, totaling $8,000. These limits are per person, not per account—you can split your $7,000 across multiple Roth IRA accounts at different brokers, but the total across all accounts can't exceed the limit.

Contributions can be made for a given tax year until the tax filing deadline (typically April 15) of the following year. Money contributed in January 2025 can be designated for either 2024 or 2025, providing flexibility to maximize contributions when you receive year-end bonuses or tax refunds. This extended deadline means you have 15 to 16 months to make each year's contribution.

Contribute as early in the year as possible to maximize time in the market for compound growth. A $7,000 contribution made in January has 12 more months to grow than the same contribution made the following December. Over 40 years, this timing difference can amount to tens of thousands of dollars in additional growth from the earlier contributions.

Combined traditional and Roth IRA contributions can't exceed the annual limit. If you contribute $4,000 to a traditional IRA, you can only contribute $3,000 to a Roth IRA the same year. This shared limit means choosing how to allocate your IRA contributions between traditional and Roth based on your tax situation and preferences.

Backdoor Roth Strategy

The backdoor Roth works by exploiting two separate tax rules: traditional IRA contributions have no income limits when made non-deductibly, and Roth conversions have no income limits. You contribute $7,000 to a traditional IRA without taking the tax deduction (filing Form 8606 to document the non-deductible contribution), then convert that $7,000 to your Roth IRA.

The conversion triggers taxes only on earnings since contribution. If your $7,000 contribution grew to $7,050 in the few days or weeks before converting, you pay tax on $50. This minimal tax cost provides Roth access to high earners who would otherwise be ineligible. The key is converting quickly before substantial gains accumulate in the traditional IRA.

The pro-rata rule complicates backdoor Roths for those with existing traditional IRA balances. Conversions are treated as part basis (non-deductible contributions) and part earnings (deductible contributions and all growth) based on the ratio across all traditional IRAs. If you have $93,000 in existing traditional IRAs (all pre-tax) and add $7,000 non-deductible, then convert $7,000, only 7 percent is tax-free ($7,000 ÷ $100,000)—you pay tax on $6,510 of the conversion.

Avoid the pro-rata rule by rolling existing traditional IRA balances into your 401(k) before executing backdoor Roth contributions, if your 401(k) plan accepts rollovers. This clears your traditional IRA balances, allowing clean backdoor Roth conversions. Alternatively, simply accept paying taxes on conversions if your existing IRA balance is modest relative to your income.

Tax-Free Growth Advantage

Money contributed to Roth IRAs grows completely tax-free forever. A $7,000 contribution that grows to $50,000 over decades can be withdrawn in retirement without paying a penny in taxes on the $43,000 in gains. This contrasts with traditional IRAs where the entire $50,000 withdrawal is taxable, or taxable brokerage accounts where you pay capital gains taxes on the $43,000 in gains.

The tax-free growth compounds over time, becoming increasingly valuable. After 10 years, your Roth IRA might hold $100,000 ($70,000 contributed plus $30,000 growth). After 30 years, it might contain $700,000 ($210,000 contributed plus $490,000 growth). After 40 years, perhaps $1.5 million ($280,000 contributed plus $1.22 million growth). That $1.22 million in tax-free gains represents money you'd pay six figures in taxes on with traditional accounts.

This advantage increases with higher returns and longer timeframes. Young investors with 30 to 40 year horizons benefit enormously from Roth tax-free growth, while older investors nearing retirement gain less advantage from the shorter compounding period. Starting Roth contributions in your 20s provides maximum benefit from decades of tax-free compounding.

Roth IRAs also provide tax-free growth on dividends and capital gains generated within the account. Traditional and taxable accounts either defer taxes on these earnings or pay annual taxes respectively, while Roth accounts allow complete tax-free accumulation and reinvestment of all distributions and gains.