Roth IRA Calculator

A Roth IRA is a retirement savings account that allows your investments to grow tax-free, and qualified withdrawals in retirement are also tax-free. Unlike traditional IRAs, contributions to a Roth IRA are made with after-tax dollars, meaning you don’t get a tax deduction upfront, but your money can grow and be withdrawn tax-free in retirement.

What Is a Roth IRA?

A Roth IRA is a type of Individual Retirement Account (IRA) that offers tax-free growth and tax-free withdrawals in retirement. Contributions are made with after-tax income, so while you don’t get an immediate tax break, your investments can grow without being taxed, and you can withdraw your contributions and earnings tax-free in retirement, provided certain conditions are met.

2025 Roth IRA Contribution Limits

For the 2025 tax year, the contribution limits for Roth IRAs are as follows:

• Under age 50: Up to $7,000.

• Age 50 or older: Up to $8,000 (includes a $1,000 catch-up contribution).

These limits apply to the total contributions made to all of your traditional and Roth IRAs combined.

Income Eligibility for Roth IRA Contributions

Your ability to contribute to a Roth IRA depends on your Modified Adjusted Gross Income (MAGI) and tax filing status:

• Single filers:

  • Full contribution if MAGI is less than $150,000.

  • Partial contribution if MAGI is between $150,000 and $165,000.

  • No contribution allowed if MAGI is $165,000 or more.

• Married filing jointly:

  • Full contribution if MAGI is less than $236,000.

  • Partial contribution if MAGI is between $236,000 and $246,000.

  • No contribution allowed if MAGI is $246,000 or more.

Roth IRA Withdrawal Rules

One of the key benefits of a Roth IRA is the flexibility in withdrawing your contributions:

• Contributions: You can withdraw your contributions at any time, tax-free and penalty-free.

• Earnings: To withdraw earnings tax-free, the following conditions must be met:

  • The Roth IRA must have been open for at least 5 years.

  • You are age 59½ or older, or the withdrawal is due to a qualifying reason (e.g., first-time home purchase, disability).

If you withdraw earnings before meeting these conditions, the earnings may be subject to taxes and a 10% penalty.

Advantages of a Roth IRA

• Tax-Free Growth: Your investments grow without being taxed, and qualified withdrawals are tax-free.

• No Required Minimum Distributions (RMDs): Unlike traditional IRAs, Roth IRAs do not require you to take distributions during your lifetime.

• Flexible Withdrawals: You can withdraw your contributions at any time without taxes or penalties.

• Estate Planning Benefits: Heirs can inherit Roth IRAs with tax-free distributions, subject to certain rules.

Considerations Before Contributing

• Income Limits: High-income earners may be restricted from contributing directly to a Roth IRA.

• No Immediate Tax Deduction: Contributions are made with after-tax dollars, so there’s no upfront tax benefit.

• Five-Year Rule: To withdraw earnings tax-free, the account must be open for at least five years.

Converting a Traditional IRA to a Roth IRA

If you’re ineligible to contribute directly to a Roth IRA due to income limits, you can consider a “backdoor” Roth IRA conversion:

• Conversion Process:

  • Contribute to a traditional IRA.

  • Convert the traditional IRA to a Roth IRA.

Note: Converting a traditional IRA to a Roth IRA may have tax implications. It’s advisable to consult with a financial advisor or tax professional before proceeding.

Planning for Retirement

Utilizing a Roth IRA can be a strategic component of your retirement planning, offering tax-free income in retirement and flexibility in withdrawals. Consider your current income, tax bracket, and retirement goals when deciding whether a Roth IRA is suitable for you.