Roth Ira Calculator

This Roth IRA Calculator helps you estimate the future value of your retirement savings by comparing a Roth IRA (tax-free growth) to a regular taxable investment account. It considers annual contributions, investment return rates, and tax impact to show you which strategy could be more beneficial in the long run.

How to Use This Calculator

1. Enter your current balance – the amount you’ve already saved.
2. Enter your annual contribution – how much you plan to invest each year.
3. Set your expected annual return – your average yearly investment growth rate (e.g., 6%).
4. Enter your current age and target retirement age.
5. Input your marginal tax rate – this affects the taxable account growth only.
6. Click “Calculate” to view total balances and a yearly schedule until retirement.

Formulas Used:

For Roth IRA (no tax on growth):
Each year:

$$\text{Roth}_{\text{new}} = \left( \text{Roth}_{\text{old}} \times (1 + r) \right) + A$$

For Taxable Account (tax paid on gains yearly):

$$\text{Taxable}_{\text{gain}} = (\text{Taxable}_{\text{old}} \times (1 + r)) – \text{Principal}$$$$\text{Taxable}_{\text{new}} = (\text{Taxable}_{\text{old}} \times (1 + r)) – (\text{gain} \times \text{tax rate}) + A$$

Where:

• $A$ = Annual contribution

• $r$ = Annual return rate (decimal)

• $\text{Principal}$ is updated yearly by adding $A$

Example Calculation:

• Current Balance: $20,000

• Annual Contribution: $7,000

• Expected Return: 6%

• Current Age: 30

• Retirement Age: 65

• Tax Rate: 25%

Results by age 65:

• Roth IRA Balance: $933,765

• Taxable Account: $663,823

• Difference: $269,942 in favor of Roth IRA

• Total Principal: $265,000

• Total Tax Paid on Taxable Account: $132,941