Roth IRA Calculator
A Roth IRA is a US retirement account with one defining feature: you contribute after-tax dollars, the money grows completely tax-free, and qualified withdrawals after age 59½ are tax-free too. You get no deduction the year you contribute — unlike a traditional IRA or a 401(k) — but in exchange the IRS never touches the growth again. Over a long horizon that is an enormous advantage, because decades of compounding generate far more than the contributions themselves.
This calculator answers the question that makes the Roth worth understanding: how much is the tax-free wrapper actually worth? It projects your balance forward and then compares it against an ordinary taxable brokerage account funded with the same dollars — one where you owe capital-gains tax on the growth. Under an illustrative 7%/year return, starting from $10,000 and adding $7,000 every year for 30 years, the Roth grows to about $783,634. You contributed only $220,000 of that; the remaining $563,634 — roughly 72% of the ending balance — is pure tax-free growth.
Run that same plan through a taxable account paying 15% capital-gains tax on its gains and you would keep about $699,089 after tax — meaning the Roth's tax shelter is worth roughly $84,545 in this scenario. One caveat governs everything below: the 7%/year figure is an illustrative assumption, not a promise or a forecast. Markets rise and fall; past returns do not guarantee future results. Treat the output as a scenario for building intuition, and remember that annual Roth contribution limits and income phase-outs set by the IRS apply in real life.
How the calculator projects a Roth IRA
Tax-free growth model
Your Roth balance has two parts: the opening balance compounding on its own, plus a stream of annual contributions that compound as an annuity. The calculator adds each year's contribution at the start of the year, then grows the whole balance once that year (annuity-due):
Roth balance = B₀ × (1 + r)ⁿ + PMT × ((1 + r)ⁿ − 1) / r × (1 + r)
| Symbol | Meaning |
|---|---|
| B₀ | Current balance you start with ($10,000) |
| PMT | Annual contribution ($7,000) |
| r | Assumed annual return as a decimal (7% = 0.07) |
| n | Number of years (30) |
Because the growth happens inside a Roth, none of it is taxed: the ending balance is also the amount you can withdraw tax-free in retirement.
The taxable-account comparison
To value the tax shelter, the tool builds an identical account that is not tax-advantaged. Same contributions, same 7% return, same ending balance — but at the end you owe capital-gains tax on the gain:
Taxable after-tax = Roth balance − capital-gains rate × (Roth balance − contributions)
Your cost basis is everything you paid in (opening balance + each year's contribution = $220,000 after 30 years). The growth above that basis is $563,634, and a 15% tax on it costs $84,545 — exactly the Roth advantage the tool reports. In reality taxable accounts are also dragged down by tax on dividends and rebalancing along the way, so this is a conservative estimate of the Roth's edge.
What the model leaves out
The projection assumes a constant, positive return every year, level contributions, and a single capital-gains rate applied once at the end. Real returns are volatile, contribution limits and income phase-outs change annually, and your future tax bracket is unknown. The calculator does not enforce the IRS annual contribution cap or income eligibility — so size your inputs to what you are actually allowed to contribute. Read the result as a clean scenario under one assumption, not a guaranteed outcome.
Worked example: $10,000 start, $7,000/year, illustrative 7%/year
Illustrative assumptions: a constant 7%/year return (for illustration only, not a promise), contributions at the start of each year, no early withdrawals, and a 15% capital-gains rate applied to the taxable account's gain at the end.
| Milestone | Contributed | Roth (tax-free) | Taxable (after 15% tax) | Roth advantage |
|---|---|---|---|---|
| Year 10 | $80,000 | $123,157 | $116,683 | $6,474 |
| Year 20 | $150,000 | $345,753 | $316,390 | $29,363 |
| Year 30 | $220,000 | $783,634 | $699,089 | $84,545 |
Three things stand out.
- The tax-free growth dwarfs your contributions. By year 30 you have paid in just $220,000, but the Roth holds $783,634 — about 72% of it ($563,634) is growth the IRS will never tax.
- The tax shelter compounds too. At year 10 the Roth beats the taxable account by only $6,474, but by year 30 the gap widens to $84,545 — because the longer the money grows, the larger the gain that escapes capital-gains tax.
- Time is the lever. The same $7,000/year does most of its work in the final decade. Starting early and leaving the account untouched is what turns a modest yearly contribution into a tax-free six-figure balance.
Re-run the calculator with a return you consider realistic and a horizon that matches your retirement date. If you also have an employer plan, compare this against FiMo's 401(k) and retirement-savings calculators to see where each tax-free or tax-deferred dollar works hardest.
Frequently asked questions
What is a Roth IRA and how does it grow tax-free?
A Roth IRA is a US retirement account funded with after-tax dollars. You get no upfront deduction, but the money grows tax-free and qualified withdrawals after age 59½ are completely tax-free — the IRS never taxes the gains. Illustrative example: a $10,000 balance plus $7,000/year for 30 years at an assumed 7%/year grows to about $783,634, of which $563,634 is tax-free growth.
How much is a Roth IRA worth compared to a taxable account?
Because the Roth shelters all growth from tax, it beats a taxable account funded with the same dollars. In the example, after 30 years the Roth holds $783,634 while an identical taxable account paying 15% capital-gains tax on its $563,634 gain keeps only $699,089 — a Roth advantage of about $84,545. The longer the horizon, the wider the gap, because more of the balance is untaxed growth.
What is the formula for projecting a Roth IRA balance?
It is the future value of a starting balance plus a stream of contributions: Balance = B₀ × (1 + r)ⁿ + PMT × ((1 + r)ⁿ − 1)/r × (1 + r), where B₀ is your current balance, PMT is the annual contribution, r is the assumed annual return and n is the number of years. Contributions are added at the start of each year (annuity-due) and the whole balance compounds annually — exactly what the calculator simulates, so every number is reproducible.
Is the 7%/year return in the examples guaranteed?
No. The 7%/year used throughout this page is an illustrative assumption chosen to keep the math easy to follow — it is neither a promise nor a forecast. Stock and fund returns vary year to year and can be negative, and past performance does not guarantee future results. Enter a rate you consider realistic for your own portfolio and stress-test a lower figure to see how sensitive your retirement plan is to weaker markets.
Roth IRA vs traditional IRA — which is better?
A Roth uses after-tax money and gives tax-free withdrawals; a traditional IRA gives an upfront deduction but taxes withdrawals as ordinary income. The Roth usually wins when you expect to be in the same or a higher tax bracket in retirement, or when you have decades of tax-free compounding ahead — as in the 30-year example here, where $563,634 of growth escapes tax entirely. This tool models the Roth side; compare it against 401(k) and traditional-IRA projections for a full picture.
Does this calculator enforce the annual contribution limit?
No. The IRS sets an annual Roth contribution cap and income phase-outs that change each year, and this calculator does not enforce either — it simply projects whatever annual amount you enter. Use it to model growth, but size your contribution to what you are actually allowed to put in for the current tax year. If your income is too high to contribute directly, ask a tax professional about the backdoor Roth route.