What is the Roth IRA?
A Roth IRA is funded with after-tax dollars, so you get no deduction today — but all growth and every qualified withdrawal in retirement are completely tax-free. For 2026 the contribution limit is $7,500 ($8,600 if 50 or older), subject to income phase-outs.
Unlike a 401(k) or traditional IRA, a Roth has no required minimum distributions, so the balance can keep compounding untouched for life and pass to heirs tax-free.
Formula & worked example
Tax avoided = Investment growth × retirement tax rate
Worked example: $7,500 a year from age 30 to 65 at 7%, starting with $20,000 → roughly $1.32 million tax-free. Of that, about $1.04 million is growth. In a taxable account at a 22% rate you would owe around $229,000 in tax on those gains — the Roth avoids it entirely.
How to use this roth ira calculator
- Enter your annual contribution, up to the $7,500 limit.
- Add your existing Roth balance if you have one.
- Use 6–8% as a realistic long-run return.
- Set your expected retirement tax rate to see the tax the Roth saves you.
Smart tips
- Contribute early in the year rather than late — an extra year of compounding across a career is worth tens of thousands.
- You may withdraw your contributions (not earnings) at any time without tax or penalty, making a Roth a flexible backup emergency fund.
- If your income exceeds the phase-out, a backdoor Roth conversion is a legal and widely used workaround.
- Roth IRAs have no RMDs, so they are the best account to leave untouched longest.
- Max the employer 401(k) match first, then the Roth IRA, then return to the 401(k).
Frequently asked questions
What is the Roth IRA contribution limit for 2026?
$7,500 for those under 50 and $8,600 for 50 and over, subject to income phase-out limits.
Roth IRA or traditional IRA?
Roth if you expect a higher tax bracket in retirement or want tax-free flexibility. Traditional if you want the deduction now and expect a lower bracket later.
Can I withdraw from a Roth IRA early?
Contributions can be withdrawn anytime tax and penalty free. Earnings withdrawn before 59½ and before the account is five years old may face tax and a 10% penalty.
What is a backdoor Roth IRA?
Contributing to a traditional IRA then converting it to a Roth. It is used by high earners whose income exceeds the direct Roth contribution limits.
Want the theory behind the numbers? Read our retirement guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: IRS — IRA contribution limits, IRS — required minimum distributions: ages and the uniform lifetime table. How we check these numbers.