Calculate Your Roth IRA Growth
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Investment Growth
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Tax-Free Value
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Tax Saved vs Taxable
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| Age | Contribution | Balance |
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What is a Roth IRA?
A Roth IRA (Individual Retirement Account) is one of the most powerful retirement tools available. Unlike a Traditional IRA or 401(k), your contributions are made with after-tax dollars, but the payoff is enormous:
- Tax-free growth: All investment gains — dividends, capital gains, interest — grow completely tax-free.
- Tax-free withdrawals: Qualified withdrawals in retirement (after age 59½, account open 5+ years) are 100% tax-free.
- No Required Minimum Distributions: Unlike Traditional IRAs and 401(k)s, you never have to withdraw from a Roth IRA. It can grow tax-free for your entire life and pass to heirs.
- Contribution access anytime: You can withdraw your contributions (not earnings) at any time, tax-free and penalty-free.
Roth IRA Contribution Limits & Income Limits (2025)
| Category | Limit |
|---|---|
| Annual contribution (under 50) | $7,000 |
| Catch-up contribution (50+) | $1,000 additional ($8,000 total) |
Income Limits (Modified AGI)
| Filing Status | Full Contribution | Partial | No Direct Contribution |
|---|---|---|---|
| Single / HOH | Under $150,000 | $150,000 – $165,000 | Over $165,000 |
| Married Filing Jointly | Under $236,000 | $236,000 – $246,000 | Over $246,000 |
Earn too much? Use the Backdoor Roth IRA strategy: contribute to a non-deductible Traditional IRA, then convert to Roth. This is legal and widely used by high earners. Consult a tax professional about the pro-rata rule if you have existing Traditional IRA balances.
Roth IRA vs Traditional IRA
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Tax on contributions | After-tax (no deduction) | Tax-deductible (if eligible) |
| Tax on withdrawals | Tax-free | Taxed as ordinary income |
| Income limits | Yes (backdoor available) | No (but deduction phases out) |
| RMDs | None—ever | Start at age 73 |
| Early withdrawal | Contributions anytime; 5-year rule for earnings | 10% penalty + tax before 59½ |
| Best if | Tax bracket same or higher in retirement | Tax bracket lower in retirement |
Roth IRA vs Roth 401(k)
Both offer tax-free growth and withdrawals, but they differ in key ways:
| Feature | Roth IRA | Roth 401(k) |
|---|---|---|
| Contribution limit | $7,000 ($8,000 50+) | $23,500 ($31,000 50+) |
| Employer match | None | Yes (match goes to Traditional side) |
| Income limits | Yes | No |
| Investment choices | Unlimited | Limited to plan options |
| RMDs | None | None (starting 2024) |
Best strategy: Contribute to your 401(k) up to the employer match, then max out your Roth IRA ($7,000), then go back and increase your 401(k) contribution.
The Power of Tax-Free Growth
The biggest advantage of a Roth IRA is that you never pay tax on the growth. Consider this comparison over 30 years:
| Scenario | Roth IRA | Taxable Account |
|---|---|---|
| Annual contribution | $7,000 | $7,000 |
| Annual return | 8% | 8% (minus taxes on dividends) |
| Years | 30 | 30 |
| Balance at 30 years | $838,000 | $838,000 (pre-tax) |
| Tax on withdrawal | $0 | ~$126,000 (15% LTCG) |
| You keep | $838,000 | $712,000 |
That's $126,000 in tax savings — and even more if tax rates increase by the time you retire.
Withdrawal Rules
- Contributions: Can be withdrawn anytime, at any age, for any reason — tax-free and penalty-free. The IRS considers contributions withdrawn first (FIFO).
- Conversions: Must wait 5 years from the year of each conversion to avoid the 10% penalty (but no tax — you already paid that).
- Earnings: Tax-free and penalty-free after age 59½ AND the account has been open for 5+ years. Otherwise, subject to tax + 10% penalty.
Exceptions to the 10% penalty on earnings
- First-time home purchase (up to $10,000 lifetime)
- Qualified education expenses
- Disability or death
- Birth or adoption (up to $5,000)
- Unreimbursed medical expenses exceeding 7.5% of AGI
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Frequently Asked Questions
A Roth IRA is an individual retirement account funded with after-tax dollars. Your investments grow tax-free, and qualified withdrawals in retirement are completely tax-free. There are no required minimum distributions.
For 2025, the limit is $7,000/year ($8,000 if you are 50 or older). These limits are combined across all your IRAs (Roth + Traditional). Income limits determine if you can contribute directly.
Use the Backdoor Roth IRA strategy: contribute to a non-deductible Traditional IRA, then immediately convert it to a Roth IRA. This is legal and used by millions of high earners. Be aware of the pro-rata rule if you have existing pre-tax IRA balances.
Yes! You can withdraw your original contributions at any time, at any age, for any reason, with no tax or penalty. This makes Roth IRAs more flexible than Traditional IRAs or 401(k)s. Only earnings have restrictions.
For earnings to be withdrawn tax-free, your Roth IRA must have been open for at least 5 tax years AND you must be 59½ or older. The 5-year clock starts on January 1 of the year you make your first contribution or conversion.
Do both! Contribute to your 401(k) at least enough to get the full employer match (free money), then max out your Roth IRA ($7,000), then increase your 401(k) contribution further. The Roth IRA offers more investment choices and tax diversification.
Since gains are never taxed, put your highest-growth investments in a Roth IRA. A diversified stock index fund (like a total market or S&P 500 index fund) is ideal for long-term growth. Hold bonds in taxable or Traditional accounts where the tax treatment matters less.
Yes! They have separate contribution limits. You can contribute $7,000 to a Roth IRA AND $23,500 to a Roth 401(k) in the same year, for a total of $30,500 in Roth contributions (more if 50+).