What Is a Roth IRA?
Emily, a 28-year-old marketing coordinator in Austin, Texas, earns $62,000 per year. She just opened a Roth IRA and contributed $7,500 for 2026. She knows that every dollar she puts in has already been taxed, which means every dollar of growth and every qualified withdrawal will be completely tax-free. If she keeps contributing $7,500 per year at a 7% average return until age 65, she will have approximately $1.1 million in tax-free retirement income. No capital gains tax. No ordinary income tax on withdrawals. No required minimum distributions during her lifetime.
A Roth IRA is an individual retirement account funded with after-tax dollars. Because you pay taxes on the money before it goes in, all future growth and qualified withdrawals are completely tax-free. This makes a Roth IRA one of the most powerful retirement savings vehicles available to eligible individuals. This calculator projects your Roth IRA balance at retirement and compares it to a traditional IRA on an after-tax basis, showing the real dollar advantage of tax-free growth. For projecting employer-sponsored plan growth, try our 401(k) Calculator.
For 2026, the IRS raised the base IRA contribution limit to $7,500, up from $7,000 in 2025. The catch-up contribution for savers 50 and older increased to $1,100, the first increase since the catch-up was introduced in 2002. This means savers 50 and older can contribute up to $8,600 in 2026. These limits apply to combined contributions across all your traditional and Roth IRAs. The IRS published these figures in Notice 2025-67.
Inputs Required
- Current Age and Retirement Age: Determines the accumulation period
- Current Roth IRA Balance: Any existing balance in your account
- Annual Contribution: How much you contribute each year (2026 limit: $7,500; $8,600 if 50+)
- Expected Annual Return: The average annual investment return
- Estimated Retirement Tax Rate: Your expected income tax rate in retirement, used to calculate the traditional IRA after-tax equivalent
Outputs Provided
- Roth Balance: Your tax-free projected balance at retirement
- Traditional IRA After-Tax Equivalent: The same balance reduced by your estimated retirement tax rate
- Roth Tax Advantage: The additional money you keep by using a Roth versus a traditional account
- Comparison Chart: Year by year view of both accounts on an after-tax basis
How the Calculation Works
The Roth IRA balance compounds identically to any investment account: each month, the existing balance earns the monthly rate and the monthly contribution is added. The key difference is at withdrawal. Roth withdrawals are completely tax-free, while traditional IRA withdrawals are taxed as ordinary income.
Roth Value = Balance at retirement (100% yours, no tax)
Traditional After-Tax = Balance x (1 - Tax Rate%)
Tax Advantage = Roth Value - Traditional After-Tax Value
The comparison assumes the same pre-tax investment return for both accounts. In reality, the Roth costs slightly more to fund because contributions are after-tax, but this is offset by the tax-free compounding and withdrawal benefits over long time horizons. For a broader retirement outlook, use our Retirement Calculator.
How to Use the Calculator
- Enter your current age and the age you plan to retire
- Input your current Roth IRA balance (or 0 if starting fresh)
- Set your annual contribution amount (up to the 2026 IRS limit of $7,500, or $8,600 if 50+)
- Enter your expected annual investment return
- Set your estimated tax rate in retirement to see the comparison
- Review the tax advantage and the year by year comparison chart
Example Calculations
Example 1: Emily from Austin is 28 years old with a $5,000 starting balance. She contributes $7,500 per year at 7% annual return, planning to retire at 65 with an estimated 22% retirement tax rate. The calculator projects a Roth balance of approximately $1,180,000. The traditional IRA equivalent after 22% tax would be approximately $920,000. Her Roth tax advantage is approximately $260,000.
Example 2: Michael, a 52-year-old engineer in Denver, has $85,000 in his Roth IRA. He contributes $8,600 per year (using the 2026 catch-up limit) at 6.5% return, retiring at 67 with an estimated 24% tax rate. The calculator shows a Roth balance of approximately $560,000 and a traditional after-tax equivalent of approximately $426,000, giving him a $134,000 tax advantage.
Example 3: Sarah, a 35-year-old physician in Boston earning $180,000, is above the 2026 Roth IRA income phaseout for single filers ($153,000 to $168,000). She uses the backdoor Roth strategy: contributing $7,500 to a non-deductible traditional IRA and converting it to a Roth. She uses the calculator to project the growth of her converted funds and compares it with her Investment Calculator projections for her taxable brokerage account.
Real World Scenarios
Young Professional Starting Out
Emily from Austin earns $62,000 and is in the 22% federal tax bracket. Opening a Roth IRA now locks in that relatively low rate on contributions. If her income rises into the 32% bracket over the next decade, she will have protected 37 years of compounding from higher future taxes. The 2026 contribution limit of $7,500 lets her save aggressively while she still qualifies for direct contributions.
Mid-Career Tax Diversification
Michael from Denver already maxes out his traditional 401(k). By also funding a Roth IRA, he builds a tax-free bucket to draw from in retirement. This gives him flexibility to manage taxable income and potentially reduce Medicare IRMAA surcharges, which are based on modified adjusted gross income from two years prior.
Backdoor Roth for High Earners
Sarah from Boston earns above the Roth IRA income limit. She contributes $7,500 to a non-deductible traditional IRA (which has no income limit) and immediately converts it to a Roth IRA. Because she has no other traditional IRA balance, the conversion has no tax consequences. This strategy lets high earners access Roth benefits indirectly. The SECURE 2.0 Act also introduced new rules for 2026 requiring catch-up contributions from high earners (over $150,000 in prior-year FICA wages) in workplace plans to be made on a Roth basis.
Common Mistakes to Avoid
- Exceeding the contribution limit: Over-contributing triggers a 6% annual excise tax on the excess until corrected. Track your contributions across all IRAs carefully. The 2026 limit is $7,500 combined across all traditional and Roth IRAs, or $8,600 if you are 50 or older.
- Earning too much to contribute directly: In 2026, the Roth IRA contribution phaseout for single filers runs from $153,000 to $168,000 MAGI. For married filing jointly, it runs from $242,000 to $252,000. Above these ranges, you cannot contribute directly. Use the backdoor Roth strategy instead.
- Withdrawing earnings too early: Roth IRA earnings withdrawn before age 59.5 or before the account is 5 years old may be subject to taxes and a 10% penalty. Contributions (not earnings) can be withdrawn at any time without penalty. The 5-year clock starts on January 1 of the year you first contribute.
- Not investing the contributions: Simply depositing into a Roth IRA without selecting investments leaves money sitting in a low-yield cash account. You must choose investments within the account to benefit from compounding growth.
Limitations of This Calculator
This calculator assumes a constant annual contribution and a fixed average return rate. Real investment returns vary year to year, and sequence of returns risk can significantly affect outcomes. The calculator does not model income phaseout rules, so verify your eligibility separately if your income is near the 2026 limits. It does not account for Roth conversion taxes, the pro-rata rule for backdoor conversions, or SECURE 2.0 Act provisions affecting high earners. The comparison with a traditional IRA assumes the same contribution amount and return rate, but in practice, contributing to a traditional IRA may provide a current-year tax deduction that could be invested elsewhere. For comprehensive retirement planning, combine this tool with our 401(k) Calculator, Retirement Calculator, and Investment Calculator. Consult a financial advisor or tax professional for personalized advice.
Authoritative Research and Resources
- IRS: Roth IRAs provides the official federal guidance on Roth IRA eligibility, contribution limits, income phaseout ranges, and withdrawal rules. The 2026 limits are published in IRS Notice 2025-67: $7,500 base contribution, $1,100 catch-up for ages 50+, with phaseout ranges of $153,000 to $168,000 for single filers and $242,000 to $252,000 for married filing jointly.
- IRS Notice 2025-67 is the official cost-of-living adjustment document for 2026 retirement plan limits. It lists the updated IRA, 401(k), SIMPLE IRA, and other qualified plan thresholds. The 401(k) elective deferral limit rose to $24,500 for 2026.
- SECURE 2.0 Act (H.R. 2617) introduced several changes affecting Roth accounts starting in 2026, including mandatory Roth catch-up contributions for high earners (above $150,000 in prior-year FICA wages) in workplace plans, and the elimination of lifetime RMDs for Roth 401(k) balances.