Roth IRA Calculator

This is a fix rate calculator for calculating the balance of Roth IRA savings and its comparison with regular taxable savings. This Roth IRA calculator assumes the contribution to be made at the end of the month or year.

Starting Principal$ 
Annual Contribution$ 
Monthly Contribution$ 
Interest Rate%
Current Age 
Retirement Age 
Marginal Tax Rate%
Inflation Rate%

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What is Roth IRA?

A Roth IRA is one type of Individual Retirement Arrangement (IRA) that provides tax-free growth. The major difference between Roth IRA and traditional IRA are:

  1. Contributions to a Roth IRA are not tax deductible.
  2. Direct contributions to a Roth IRA may be withdrawn tax free at any time without penalty.

Roth IRA offers tax-free income in retirement. There is no tax deduction on funds placed in a Roth IRA, but the advantages all come later. This makes a Roth IRA a useful tool for someone who expects to be in a higher tax bracket in retirement than in most of his or her working life. Typically, a worker earning a relatively low salary won't miss getting a tax deduction on the funds placed in a Roth IRA, but, after saving and investing many years, and moving up into a higher income level, it will be very handy for such a person to have tax-free income in retirement.

Contributing to a Roth IRA

Most middle-income Americans are eligible for a Roth IRA. For 2016, the top amount is having an adjusted gross income of $132,000 or more up from $131,000 for 2015 if you're single or heads of the household, or if you're married and filing your taxes jointly, it's an adjusted gross income of $194,000 up from $193,000 for 2015. Furthermore, to qualify for a Roth IRA Contribution, you must have "earned income" (wages, tips, bonuses, self-employment income, etc.) in the year you want to make a contribution. The contribution limit in 2015 and 2016 for age 49 and below is $5,500, for age 50 and above is $6,500.

Distribution from a Roth IRA

Once you reach the age of 59 and a half, you can begin taking tax-free distributions from your Roth IRA (so long as you've had it for more than five years).

It is very important to observe the five-year rule. Most people who set up Roth IRAs do so early in their working life, and keep them for many years, so it is not often an issue. It is also possible to convert a traditional IRA to a Roth IRA – rules for tax in doing this are complex, and should be attentively followed.

The Roth IRA calculator above helps estimate your balance and interest saving by contributing to Roth IRA.