How much will your Roth IRA
be worth tax-free at retirement?

Field guide

What makes a Roth IRA different from every other account?

A Roth IRA (Individual Retirement Account) is funded with after-tax dollars. You get no tax deduction when you contribute. But every dollar of growth — interest, dividends, capital gains, is permanently sheltered from income tax, and qualified withdrawals in retirement are completely tax-free. You pay the tax once, at contribution, and never again.

That distinction compounds dramatically over time. A $7,000 Roth contribution at age 25, growing at 7% annually, becomes roughly $106,000 by age 65 and every penny is yours. In a taxable brokerage account you'd owe long-term capital-gains tax on the $99,000 of growth. In a Traditional IRA, you'd owe ordinary income tax on the full $106,000 withdrawal. The Roth eliminates that bill entirely.

Roth IRA eligibility and income limits (2024/2025).

The IRS limits who can contribute to a Roth IRA based on modified adjusted gross income (MAGI). Contributions phase out and eventually disappear as income rises:

If your income is above the limit, you cannot contribute directly — but a “Backdoor Roth” conversion (contribute to a non-deductible Traditional IRA, then convert to Roth) remains available to high earners. It involves careful tax planning but is widely used and legal.

Contribution limits and catch-up provisions.

For 2024 and 2025, the standard annual contribution limit is $7,000. If you're age 50 or older, a “catch-up” provision allows an additional $1,000, for a total of $8,000/year. These limits apply across all your IRAs combined. You cannot put $7,000 into a Roth and $7,000 into a Traditional IRA in the same year; the total across both must stay at or under the limit.

You must have earned income (wages, self-employment income, alimony) at least equal to your contribution. Investment income, Social Security, and pension income do not count. A non-working spouse can still contribute via a “Spousal IRA” as long as the working spouse has sufficient earned income to cover both contributions.

The 5-year rule, when can you withdraw?

Roth IRA withdrawals are tax- and penalty-free only if two conditions are met:

• You are at least 59½ years old. Early withdrawals of earnings (not contributions) before 59½ are subject to a 10% penalty plus income tax. (Your original contributions can always be withdrawn penalty-free at any age — you already paid tax on them.)
• The account is at least 5 years old. The 5-year clock starts on January 1 of the year you made your first Roth IRA contribution — to any Roth IRA, not just the current one. If you open a Roth at age 58, the earliest you can take a fully qualified distribution is age 63 (not 59½), because the 5-year rule must also be satisfied.

Conversions (rolling a Traditional IRA into a Roth) have their own 5-year rule: each conversion has a separate 5-year window before the converted amount can be withdrawn penalty-free. This mainly matters if you do a Backdoor Roth and need the funds within 5 years.

Roth IRA vs. Traditional IRA, which wins?

The answer depends almost entirely on whether your tax rate will be higher or lower in retirement than it is today:

• Roth wins when retirement taxes are higher. If you expect to be in a higher bracket in retirement — because of Required Minimum Distributions, Social Security, rental income, or simply higher future tax rates — paying tax now at a lower rate is a better deal.
• Traditional wins when retirement taxes are lower. High earners in their peak earning years who expect a lower income (and thus lower bracket) in retirement benefit from deferring tax until that lower rate applies.
• When in doubt, Roth has a structural edge. The Roth contribution limit is effectively higher in after-tax terms: a $7,000 Roth contribution represents $7,000 of post-tax wealth, while a $7,000 Traditional contribution will eventually face a tax bill that reduces it below $7,000. Roth also has no Required Minimum Distributions (RMDs), offering more flexibility. And tax rates are historically uncertain — the Roth locks in today's known rate.

Roth IRA vs. Roth 401(k).

Many employers now offer a Roth 401(k) option alongside the traditional 401(k). Key differences:

• Higher limits: The 2024 401(k) employee contribution limit is $23,000 ($30,500 with catch-up), more than 3× the Roth IRA limit.
• No income limits: Anyone can contribute to a Roth 401(k) regardless of income, unlike the Roth IRA phase-out.
• Employer match: If your employer matches contributions, that match goes into a traditional (pre-tax) 401(k) account even if your contributions are Roth. You'll owe taxes on the match at withdrawal.
• Investment choices: Roth IRA gives you full investment flexibility (any broker, any fund). Roth 401(k) is limited to your employer's plan options, which may have higher fees.

The common strategy: max the 401(k) up to the employer match, then max the Roth IRA, then return to the 401(k) if there's more to save.

Disclaimer

This calculator uses constant annual returns and a simplified 15% long-term capital-gains rate for the taxable comparison. It does not model annual dividend taxation, state taxes, Social Security interactions, Required Minimum Distributions, or the compounding benefit of Traditional IRA's upfront tax deduction. Actual results depend on your specific tax situation. Consult a CPA or financial adviser before making retirement account decisions.