Roth IRA Calculator

With this Roth IRA calculator, you can see how your retirement portfolio can grow. It also shows how it compares to a normal taxable account. When it comes to investing, tax savings can have a huge impact.

To start, enter each of the inputs below. The retirement calculator then automatically updates. And if you’re unsure of what numbers to use, check out the definitions below. You’ll also find more insight and free investing resources.

Roth IRA Calculator

The Starting Balance is the current amount in your Roth IRA. If you’re just starting out, this number should be zero.

With the Annual Contribution, enter the average amount you hope to add each year going forward. And keep in mind that there are limits each year. If you contribute above the limit, you won’t see additional tax savings.

The Current Age is your age today and Age at Retirement is when you expect to retire. Both of these inputs help the Roth IRA calculator determine how long your portfolio will grow.

For the Expected Rate of Return, enter the average annual return that you expect. And stocks usually return 8-12% annually over the long-run. If you have a portfolio with both bonds and stocks, the average will likely be lower.

The Marginal Tax Rate depends on what tax bracket you’ll be in. For long-term capital gains, many people see a 15% tax rate. Or if you want to compare to short-term capital gains, you can use the normal income tax brackets.

Roth IRA Calculator Results

Based on the numbers you enter, you’ll see your total contributions. This is over the given timeframe. Then below that, the graph shows the change each year. This factors in your investment returns and also compares to a taxable account.

As you play around with the numbers, you’ll see that the longer the timeframe, the bigger the tax savings become. This is also a good reminder that it’s important to start saving and investing sooner rather than later.

For another look at how your investments can grow, check out this free investment calculator. It shows a graph as well but also gives you a table with each of the annual changes.

Roth vs. Traditional IRA Tax Savings

The Roth IRA calculator shows you how much you can save in taxes. And traditional IRAs also have similar tax benefits. Although, the main difference between these retirement accounts is when the taxes occur.

With Roth IRAs, you pay taxes in the year that you contribute funds. Then in retirement when you withdraw funds, you don’t pay taxes. For traditional accounts this is reversed. When you contribute funds, you don’t pay taxes. Then when you withdraw down the road, you pay taxes.

So if you think you’re in a lower tax bracket today than you’ll be in retirement, contributing to a Roth IRA makes more sense. And on the other hand… if you’re in a higher tax bracket today, it’s probably best to save in taxes by contributing to a traditional IRA.

The benefit to both of these accounts is that they grow tax free. This is where the big difference shows up compared to normal taxable accounts. And you can see this in the Roth IRA calculator above.

Roth IRA Contribution and Income Limits

If you’re younger than 50, you can contribute $6,000 to a Roth IRA in 2022. If you’re 50 or older, you can contribute an additional $1,000. This is called a “catch-up” contribution and it brings the total to $7,000.

With inflation and other economic changes, this number changes over time. For example, it was a $5,500 limit in 2018. So, it’s best to check with the IRS for up-to-date limits.

On top of that, not everyone is able to make good use of this Roth IRA calculator. To contribute to IRAs, you need earned income from the year. And not everyone pulls in income each year. Also, there are high income limits for Roth IRAs and once again, that’s best to check directly with the IRS.

Beyond the Roth IRA Calculator

When it comes to building your nest egg, taxes have a huge impact. That’s why it’s important to plan ahead. So, it’s good you found this Roth IRA calculator.

The tax code is complex but everyone plays by the same rules. And you shouldn’t have to pay Uncle Sam any more than you’re legally required to pay.

To learn more about taxes and investing, sign up for Investment U below. It’s a free e-letter that’s packed with investing insight from market experts.

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