Free Roth IRA calculator

How a Roth IRA actually works

A Roth IRA is an individual retirement account with one defining feature: you fund it with money you’ve already paid income tax on, and in return everything that happens inside the account is tax-free. There’s no deduction the year you contribute — the dollars go in after tax — but the balance then grows without any tax drag, and when you take a qualified withdrawal in retirement, not a single dollar is taxed. Not your contributions, and not the decades of growth stacked on top. The simplest way to picture it: you pay tax on the seed, never on the harvest. This calculator models that growth with monthly compounding and splits the final balance into the part you put in versus the tax-free growth, so the payoff of the structure becomes impossible to miss.

That after-tax-in, tax-free-out design is the mirror image of a traditional IRA or 401(k). The trade-off is entirely about timing — whether you’d rather hand the IRS its cut today or in retirement.

Roth vs. traditional: the tax-timing trade-off

A traditional IRA gives you a tax deduction the year you contribute, grows tax-deferred, and is then taxed as ordinary income when you withdraw. A Roth flips that: no deduction now, but qualified withdrawals later — growth included — are completely tax-free. Neither is universally better; the right choice hinges on a single question: will your tax rate be higher now or in retirement? If you expect to be in the same or a higher bracket later, the Roth usually wins, because you lock in today’s rate and let years of compounding escape tax entirely. If you expect a markedly lower bracket in retirement, the upfront deduction of a traditional account may be worth more. Younger savers and anyone early in their career often lean Roth, since their current rate is likely the lowest it will be for a long time — and many people simply split contributions between both to hedge against an unknown future.

Contribution limits and income phase-outs

The IRS sets an annual contribution limit that applies across all your IRAs combined, and it’s adjusted most years to keep up with inflation. Once you reach 50 you can add a catch-up contribution on top. Roth IRAs carry one extra wrinkle that traditional IRAs don’t: an income phase-out. Above a certain modified adjusted gross income your contribution limit begins to shrink, and above a higher threshold you can’t contribute directly at all. (Higher earners sometimes use a “backdoor” strategy to get money into a Roth anyway, which is worth researching or asking an adviser about.) Because every one of these figures moves year to year, always confirm the current limit and phase-out ranges on the IRS website rather than relying on a fixed number — the durable rule of thumb is simply to contribute what you can, as early as you can.

The 5-year rule, briefly

Two conditions generally unlock fully tax-free earnings: you must be at least 59½, and your first Roth contribution must have been made at least five tax years ago. That five-year clock starts with your very first contribution and applies even if you’re already past 59½, which is one more reason to open a Roth sooner rather than later. Importantly, your own contributions are a different story — because you already paid tax on them, you can withdraw them at any time, tax- and penalty-free. It’s the growth that the age and 5-year rules are there to protect.

Why tax-free compounding is so powerful

Over a working lifetime, the growth inside a retirement account usually ends up far larger than the sum of everything you contributed — compounding does the heavy lifting, and the longer the runway, the more lopsided that split becomes. Push the years out in the calculator above and watch the tax-free slice of the stacked bar swell until it dwarfs your contributions. In a taxable brokerage account, that growth gets nibbled by taxes along the way and again when you sell. In a Roth, it’s untouched: the entire balance is yours to spend in retirement. Applying the 4% rule to that balance — withdrawing about 4% in your first year and adjusting for inflation after — gives a rough sense of the monthly income it could throw off, and in a Roth that income is tax-free too, which makes it stretch further than the same number from a traditional account.

Related tools & guides

A Roth IRA is one piece of the retirement picture. To weigh it against your workplace plan, try the 401(k) calculator; to model every account together into a single nest egg, use the retirement calculator; and to see how any lump sum or recurring habit compounds over time, open the investment growth calculator. This calculator is an educational estimate, not financial or tax advice — for decisions specific to your situation, talk to a qualified adviser.