How the Roth IRA Calculator Works
The calculator uses the future value formula for a growing annuity to project your Roth IRA balance. Starting with your current balance, it adds your annual contribution and applies the expected annual return each year until retirement. The result is your projected tax-free withdrawal value — 100% yours with no taxes owed on growth or qualified withdrawals.
The formula:
The Roth vs. Traditional comparison adjusts the projected balance for your retirement tax rate to calculate the Traditional IRA's after-tax value, accounting for the current-year deduction Traditional contributions receive.
2025 Roth IRA Contribution Limits & Income Rules
| Category | 2025 Limit |
|---|---|
| Annual contribution (under 50) | $7,000 |
| Annual contribution (50 and older) | $8,000 (with $1,000 catch-up) |
| Single — full contribution MAGI limit | Below $150,000 |
| Single — phase-out range | $150,000 – $165,000 |
| Married filing jointly — full limit | Below $236,000 |
| Married filing jointly — phase-out | $236,000 – $246,000 |
| Qualified withdrawal age | 59½ + 5-year rule |
| Required minimum distributions | None (owner's lifetime) |
The Power of Tax-Free Compound Growth
The Roth IRA's unique advantage is that investment growth is never taxed — not when it accrues, not when you withdraw it. In a taxable brokerage account, dividends and capital gains are taxed annually or upon sale. In a Traditional IRA, the entire balance is taxed at withdrawal. In a Roth, the growth is permanently tax-free.
Consider a 35-year-old contributing $7,000/year to a Roth IRA for 30 years at 7% annual return. At retirement, the account holds approximately $661,000. In a Traditional IRA with the same inputs and a 22% retirement tax rate, the after-tax value is about $516,000 — a $145,000 advantage for the Roth, even before counting the flexibility benefits.
| Starting Age | $7,000/yr · 7% return · Retire at 65 | Total Contributed |
|---|---|---|
| 25 | $1,453,000 | $280,000 |
| 30 | $1,020,000 | $245,000 |
| 35 | $707,000 | $210,000 |
| 40 | $482,000 | $175,000 |
| 45 | $320,000 | $140,000 |
* Approximations. Balances include starting balance of $0 and annual contributions of $7,000 at 7% annual return, compounded annually.
Roth IRA vs. Traditional IRA: The Decision Framework
The core question is whether your tax rate is higher now or in retirement. Since that's uncertain for most people, the practical framework is:
- Choose Roth if: You are early in your career (low income now, higher later). You expect tax rates to rise. You want flexibility — Roth contributions (not earnings) can be withdrawn anytime. You want to avoid RMDs. You are making Backdoor Roth contributions because your income exceeds direct contribution limits.
- Choose Traditional if: You are in a high tax bracket now and expect lower income in retirement. You need the deduction to reduce current taxable income. Your employer plan already provides Roth options (diversify with Traditional IRA).
- Consider both: Tax diversification — having both Roth (tax-free) and Traditional (tax-deferred) accounts in retirement gives flexibility to manage which bracket you draw from each year.
Backdoor Roth IRA: What It Is and When to Use It
If your income exceeds the Roth IRA direct contribution limits, you can use the Backdoor Roth strategy: (1) Make a non-deductible contribution to a Traditional IRA (anyone with earned income can do this, regardless of income). (2) Convert the Traditional IRA to a Roth IRA. (3) Pay taxes on any gains between contribution and conversion (usually minimal if done promptly).
Important: the pro-rata rule means if you have other pre-tax Traditional IRA balances, the conversion is taxed proportionally. Consult a tax advisor before executing a Backdoor Roth if you have existing pre-tax IRA funds.
Questions You Might Ask
What is the Roth IRA contribution limit for 2025?
$7,000 per year ($8,000 if age 50+). Contributions phase out between $150,000–$165,000 MAGI for single filers and $236,000–$246,000 for married filing jointly. You cannot contribute more than your earned income for the year.
Roth vs. Traditional IRA: which is better?
Roth is generally better if you expect to be in a higher tax bracket in retirement than now. Traditional is better if you expect a lower bracket in retirement. Young, lower-income earners almost always benefit more from Roth. When in doubt, Roth provides more flexibility: no RMDs, contributions withdrawable anytime, and better estate planning outcomes.
When can I withdraw from a Roth IRA without penalty?
Contributions can be withdrawn at any time without taxes or penalty. Earnings are tax-free and penalty-free after age 59½ AND after the account has been open for at least 5 years. Early withdrawal of earnings is subject to 10% penalty plus income tax, with exceptions for first-time home purchase, disability, higher education, and others.
Does a Roth IRA have required minimum distributions?
No. Roth IRAs are exempt from RMDs during the owner's lifetime under current law (SECURE 2.0 Act). Traditional IRAs and 401(k)s require RMDs starting at age 73. This makes the Roth IRA the most flexible retirement account for long-term planning and wealth transfer.
Methodology
FiscalCalc's Roth IRA calculator uses the standard future value annuity formula, compounding annually. The Roth vs. Traditional comparison models the Traditional IRA as having the same gross balance at retirement, reduced by the stated retirement tax rate (simulating RMD-driven withdrawals at that rate), and credits the Traditional with a current-year tax deduction equal to total contributions × current tax rate. This is a simplified comparison — actual outcomes depend on tax law changes, state taxes, contribution timing, and investment choices. 2025 contribution limits and income phase-out ranges are sourced from IRS Publication 590-A. All calculations run client-side in your browser. Last updated: May 2026.