Calculate tax-free growth of Roth IRA savings and compare with regular taxable accounts. Estimate your retirement balance with after-tax contributions and tax-free withdrawals.
A Roth IRA is a retirement account where you contribute after-tax dollars, but your investments grow tax-free and qualified withdrawals in retirement are completely tax-free. This makes Roth IRAs particularly valuable for younger investors and those who expect to be in the same or higher tax bracket in retirement.
Unlike Traditional IRAs, Roth IRAs have no Required Minimum Distributions (RMDs) during the owner's lifetime, making them excellent for estate planning and long-term wealth transfer.
No taxes on dividends, interest, or capital gains
Withdraw contributions anytime penalty-free
Let your money grow as long as you want
| Age Group | Contribution Limit | Income Phase-Out (Single) | Income Phase-Out (Married) |
|---|---|---|---|
| Under 50 | $7,000 | $138,000 - $153,000 | $218,000 - $228,000 |
| 50 and Over | $8,000 | $138,000 - $153,000 | $218,000 - $228,000 |
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Contribution Deduction | No | Yes (if eligible) |
| Tax on Growth | Tax-free | Tax-deferred |
| Tax on Withdrawals | Tax-free (qualified) | Fully taxable |
| Income Limits | Yes | Yes (for deduction) |
| RMDs at 73 | No | Yes |
| Early Withdrawal Penalty | Earnings only | Entire amount |
| Withdrawal Type | Tax Treatment | Penalty | Requirements |
|---|---|---|---|
| Contributions | Tax-free | None | Anytime, any reason |
| Earnings (under 59½) | Taxable | 10% | Unless exception applies |
| Earnings (over 59½) | Tax-free | None | 5-year rule satisfied |
| First-time Home | Tax-free | None | Up to $10,000 lifetime |
Contribution 5-Year Rule: Each conversion has its own 5-year period. Must wait 5 years before withdrawing converted amounts penalty-free.
Earnings 5-Year Rule: Must wait 5 years from first Roth contribution before withdrawing earnings tax-free, even if over 59½.
Inherited Roth 5-Year Rule: Beneficiaries must wait 5 years from original owner's first contribution for tax-free withdrawals.
Convert during low-income years to minimize tax impact
| Conversion Strategy | Best For | Tax Impact | Timing |
|---|---|---|---|
| Full Conversion | Low current income | All taxable in conversion year | When in low tax bracket |
| Partial Conversion | Moderate income | Spread over multiple years | Stay within tax bracket |
| Roth Ladder | Early retirees | Convert annually | Bridge to age 59½ |
| Age Range | Strategy | Focus | Considerations |
|---|---|---|---|
| 20s-30s | Aggressive Growth | Maximum contributions | Long time horizon |
| 40s-50s | Balanced Growth | Catch-up contributions | Peak earning years |
| 50s-60s | Pre-Retirement | Roth conversions | Lower post-career income |
| 60s+ | Distribution Planning | Tax-free income | No RMD requirements |
Income Too High: Contributing when income exceeds limits results in excess contribution penalty.
Early Earnings Withdrawal: Taking earnings before 59½ and 5-year rule triggers taxes and penalties.
Not Understanding 5-Year Rules: Each conversion and contribution has separate timing requirements.
Forgetting About Conversions: Missing opportunities to convert during low-income years.
| Feature | Roth IRA | Roth 401(k) |
|---|---|---|
| Contribution Limit (2025) | $7,000 ($8,000 if 50+) | $23,500 ($31,000 if 50+) |
| Income Limits | Yes | No |
| RMDs | None | Required at 73 |
| Investment Options | Unlimited | Plan-specific |
| Employer Match | No | Yes (pre-tax) |