Compare your Roth IRA growth against a taxable investment account. See projected balances, total taxes saved, and a year-by-year schedule through retirement.
A Roth IRA (Individual Retirement Account) is a tax-advantaged retirement savings account that allows your money to grow completely tax-free. Unlike a Traditional IRA, contributions to a Roth IRA are made with after-tax dollars — meaning you pay income tax on the money before it goes in. In exchange, all qualified withdrawals in retirement are 100% tax-free, including the earnings accumulated over decades of compound growth.
This tax-free growth is the defining advantage of a Roth IRA. Over a 30- or 40-year investment horizon, the difference between paying taxes on withdrawals versus paying no taxes at all can amount to hundreds of thousands of dollars. The Roth IRA calculator above lets you quantify exactly how large that advantage is for your personal situation.
The calculator compares two parallel investment scenarios:
Specifically, the Roth IRA grows each year as:
Balancenext = Balancecurrent × (1 + r) + Annual Contribution
The taxable account grows as:
Balancenext = Balancecurrent × (1 + r × (1 − tax rate)) + Annual Contribution
The "Roth Advantage" shown in the results is the difference between your Roth IRA balance and what you would have accumulated in an equivalent taxable account, net of annual taxes. This figure represents the real monetary benefit of using a Roth IRA versus investing taxably.
The IRS sets annual limits on how much you can contribute to a Roth IRA. For 2026, the limits are:
When you check "Maximize contributions" in the calculator, it automatically uses $7,000 for each year you are under 50 and $8,000 for each year you are 50 or older, matching the IRS rules precisely. This gives you the most accurate projection of what fully funding your Roth IRA would produce by retirement.
Note that the IRS contribution limit applies to combined contributions across all your IRA accounts (Traditional and Roth). If you contribute $3,000 to a Traditional IRA, your Roth contribution limit for that year is reduced to $4,000 (if under 50).
Not everyone can contribute to a Roth IRA directly. The IRS imposes income limits based on modified adjusted gross income (MAGI). For 2026:
If your income exceeds these limits, you may still be eligible for the "backdoor Roth IRA" strategy — making a non-deductible Traditional IRA contribution and then immediately converting it to a Roth IRA. Consult a tax advisor to determine whether this approach is right for your situation.
The Roth vs. Traditional IRA question comes down to one core factor: do you expect your tax rate in retirement to be higher or lower than your tax rate today?
Many financial planners recommend holding both types — a Roth and a Traditional IRA — to give yourself tax flexibility in retirement. Having some taxable and some tax-free income streams allows you to manage your effective tax rate year by year.
The true advantage of the Roth IRA is not just about avoiding taxes at withdrawal — it's about compounding on a larger base for decades without interruption. In a taxable account, taxes are paid each year on earnings, which reduces the amount available to compound. Over 35 years, this drag can be enormous.
Consider an example: $30,000 starting balance, $7,000 annual contribution, 6% return, 35 years, 25% marginal tax rate. The Roth IRA grows to approximately $1,066,000. A taxable account with the same inputs, taxed annually at 25% on earnings (effective rate: 4.5%), grows to approximately $751,000. The Roth IRA produces over $315,000 more — and that's before considering that Roth withdrawals are also tax-free while taxable withdrawals may trigger capital gains taxes.
To take qualified tax-free withdrawals from your Roth IRA, the account must have been open for at least five years and you must be at least 59½ years old. The 5-year clock starts on January 1st of the first tax year for which you made a Roth IRA contribution. For example, if you open a Roth IRA and make a contribution for the 2025 tax year (even in April 2026), your 5-year period begins January 1, 2025.
Unlike Traditional IRAs and 401(k)s, Roth IRAs have no required minimum distributions during the account owner's lifetime. You can let the money compound indefinitely, which makes the Roth IRA an excellent wealth transfer tool. Your heirs will inherit the account and enjoy tax-free withdrawals, though inherited Roth IRAs are subject to RMD rules for non-spouse beneficiaries under the SECURE 2.0 Act.
You can withdraw your contributions (not earnings) from a Roth IRA at any time, for any reason, without taxes or penalties. This is because you already paid taxes on that money. This feature makes the Roth IRA more flexible than other retirement accounts and serves as an accessible emergency fund of last resort — though it is generally wise to leave the money invested.
Withdrawing the earnings from a Roth IRA before age 59½ (and before the account is 5 years old) generally results in a 10% early withdrawal penalty plus ordinary income taxes on the earnings. There are exceptions for first-time home purchases (up to $10,000 lifetime), disability, substantially equal periodic payments (72(t)), and certain medical expenses.
Many employers now offer a Roth 401(k) option. Here's how it compares to a Roth IRA:
The optimal strategy for many people is to contribute to both: max out the Roth IRA for its flexibility and broad investment choices, and also contribute to a Roth 401(k) to benefit from the higher limits and any employer match.
Time is the most powerful variable in the Roth IRA calculator. A 25-year-old who contributes $7,000/year at 6% for 40 years will accumulate dramatically more than a 35-year-old doing the same for 30 years — not just 25% more, but nearly twice as much, because the extra decade of compounding applies to an ever-growing base. Starting 10 years earlier can roughly double your retirement balance.
You can make your Roth IRA contribution for a given tax year as early as January 1st of that year (or as late as the tax filing deadline — typically April 15th of the following year). Contributing at the start of the year rather than the end gives your money 12 extra months to compound. Over a 30-year career, this timing difference can add tens of thousands of dollars to your final balance.
Because Roth IRA growth is tax-free, it makes sense to hold your highest-growth, highest-return investments in the Roth IRA. Stocks and equity funds that might generate large capital gains or dividends are ideally suited for a Roth account, where none of those gains will ever be taxed. Bonds and other lower-yield assets can go in taxable accounts where the tax cost is lower.
While you can withdraw contributions penalty-free, withdrawing earnings early is costly. A 10% penalty plus income taxes can consume 35–45% of the withdrawn amount for many earners. Protect the compounding engine by leaving your Roth IRA untouched until retirement whenever possible.
A Roth conversion involves moving money from a Traditional IRA or 401(k) into a Roth IRA. You pay income taxes on the converted amount in the conversion year, but all future growth is tax-free. Conversions are especially advantageous during low-income years (early retirement, sabbaticals, business losses) when your marginal rate is temporarily low.
Opening a Roth IRA is straightforward. You can open one at any major brokerage firm — Fidelity, Vanguard, Charles Schwab, or an online platform. The process typically takes 15–30 minutes and requires:
Once the account is open, choose your investments. Many beginners start with a low-cost target-date index fund that automatically adjusts its stock/bond allocation as you approach retirement. This gives immediate diversification with minimal decision-making.
Yes. Having a 401(k) at work does not affect your ability to contribute to a Roth IRA, as long as your income is within the Roth IRA income limits. You can (and often should) contribute to both simultaneously to maximize tax diversification.
The calculator uses the standard year-by-year compounding formula used by financial planners. Contributions are added at the end of each year. The taxable account applies annual taxes on interest at your marginal rate each year. Results are projections based on a constant rate of return — actual investment returns will vary year to year. Use the calculator as a planning guide, not a guarantee.
Contributing any amount is better than contributing nothing. Even $50 or $100 per month compounds significantly over decades. Start with what you can afford and increase your contribution by 1% of income each year or whenever you get a raise. The most important thing is to start.
Yes, you can hold both types of IRAs simultaneously. However, the annual contribution limit ($7,000 or $8,000 for 2026) is the combined total across all your IRAs. You cannot contribute $7,000 to each — the limit applies to the aggregate of all IRA contributions in a given year.
Your Roth IRA passes to your designated beneficiaries. A surviving spouse can roll the account into their own Roth IRA and continue tax-free growth with no RMDs. Non-spouse beneficiaries generally must withdraw the entire balance within 10 years of the original owner's death (under SECURE 2.0), but withdrawals remain tax-free.
Yes. Contributions exceeding the annual limit are subject to a 6% excise tax each year until the excess is removed. If you realize you've over-contributed, you can withdraw the excess contribution (plus any earnings) by the tax filing deadline to avoid the penalty. Tracking your contributions carefully each year is important.