Roth IRA Calculator

What this Roth IRA calculator does

This calculator projects the value of a Roth IRA and compares it with a taxable account. It uses your current balance, annual contributions, expected return, time to retirement, and marginal tax rate.

Roth contributions are assumed to be made with after-tax dollars, so qualified withdrawals are not taxed. The taxable account pays tax on investment returns each year.

How to use this calculator

1. Enter the current balance and annual contribution.
2. Enter the expected annual return.
3. Enter your current age and retirement age.
4. Enter your marginal tax rate.
5. Click Calculate.

The default example starts at age 30 with $30,000, contributes $7,500 per year, earns 6%, and retires at 65 with a 25% marginal tax rate.

Roth IRA formula

The Roth balance compounds the current balance and annual contributions:

Roth balance = P × (1 + r)^n + C × ((1 + r)^n − 1) / r

The taxable account grows at an after-tax return:

After-tax return = r × (1 − tax rate)
Taxable balance = P × (1 + after-tax return)^n + C × annuity factor

P is the current balance, C is the annual contribution, r is the annual return, and n is the number of years until retirement.

What the results include

• Roth IRA balance: the projected tax-free balance.
• Roth interest: the growth above total principal.
• Taxable account balance: the projected after-tax balance.
• Taxable interest: the growth above total principal.
• Tax on taxable returns: the estimated tax paid along the way.
• Roth advantage: the difference between the Roth and taxable balances.
• Total principal: current balance plus all contributions.

Assumptions and limitations

The calculator assumes annual contributions at the end of each year and a constant return and tax rate. It does not model contribution limits, income eligibility rules, catch-up contributions, required minimum distributions, state taxes, or changes in tax law. The taxable account tax is assumed to be paid annually on returns.

Frequently asked questions

Are Roth IRA withdrawals always tax-free?

Qualified withdrawals are tax-free. Early or nonqualified withdrawals may be subject to tax and a penalty. This calculator assumes qualified withdrawals.

Why does the Roth IRA beat the taxable account?

The Roth grows without annual tax on returns, while the taxable account pays tax each year. Over a long period, that difference compounds.

Does this include the annual contribution limit?

No. The calculator uses the amount you enter. Check the current IRS limit and income eligibility rules before contributing.

What if my tax rate changes in retirement?

This comparison assumes the tax rate stays constant while the taxable account is growing. A changing tax rate would change the result.

Source

References:

• IRS — Roth IRAs
• Investor.gov — Individual Retirement Accounts

Disclaimer

This calculator is for informational and educational purposes only. It is not tax or investment advice. Consult a tax professional about your situation.