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Contributions can be withdrawn anytime tax and penalty free. Earnings withdrawn before 59½ and before the account is five years old may face tax and a 10% penalty.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.