Roth IRA Calculator

$7,000 contributed to a Roth IRA at 30, compounded at 7% for 35 years, becomes about $74,800 — entirely tax-free in retirement. The same $7,000 in a Traditional IRA grows the same dollar amount, but the full $74,800 is taxed as ordinary income on withdrawal. At a 22% retirement marginal rate, that's $16,400 of tax — money that the Roth keeps.

The intuition: the Roth taxes the seed; the Traditional taxes the harvest. Whichever is larger (taxes paid now vs. taxes paid on the eventual balance) determines which account is better. For long horizons and lower current brackets, the harvest is much larger than the seed, so the Roth wins.

Roth IRA direct contribution eligibility phases out at higher incomes (for 2024: $146,000–$161,000 single, $230,000–$240,000 joint). Above the phaseout, direct contributions aren't allowed — but conversions have no income limit, so the "backdoor Roth" workflow is available: contribute to a nondeductible Traditional IRA, then convert it.

Some employer 401(k) plans also offer a Mega Backdoor Roth: after-tax contributions to the 401(k) (above the standard pre-tax limit) followed by an in-plan conversion or in-service rollover to a Roth IRA. When available, this can move tens of thousands of additional dollars into Roth tax-free space each year.

Roth IRA contributions (the dollars you actually contributed, not the earnings on them) can be withdrawn at any time, for any reason, tax- and penalty-free. This makes the Roth a stealth secondary emergency fund: contributions are accessible if truly needed, while the earnings remain locked up to compound.

Earnings withdrawals before age 59½ generally trigger taxes and a 10% penalty unless an exception applies (first-time home purchase up to $10K, qualified education, disability, etc.). The five-year rule adds another layer: each conversion has its own five-year clock for penalty-free access.

Converting Traditional IRA balances to Roth pays the tax now to capture tax-free growth. The classic scenarios where this wins: a year of unusually low income (sabbatical, gap year, early retirement before Social Security begins), a year before tax rates are scheduled to rise (TCJA individual rates currently scheduled to revert in 2026), or any year where you can fill up a lower bracket without pushing into a higher one.

Common mistake: converting too much in one year. A large conversion can push you into a higher bracket, raise your IRMAA Medicare premium, increase Social Security taxation, or trigger Net Investment Income Tax — making the conversion locally suboptimal even if Roth is the right long-run destination. "Filling brackets" — converting just enough to top off the 22% or 24% bracket — is usually the smarter approach.

Compare your current marginal tax rate to your expected retirement marginal rate. Higher now → Traditional. Higher later → Roth. Equal → mathematically a wash, but Roth's flexibility advantages tip it slightly.

In practice, future tax rates are uncertain. A diversified "tax bucket" approach — holding meaningful balances in pre-tax (Traditional 401(k), Traditional IRA), Roth (Roth 401(k), Roth IRA), and taxable (brokerage) accounts — gives the most flexibility to manage retirement income tax efficiently regardless of how rates change.