Project how your Roth IRA grows into a tax-free nest egg — every dollar of growth is yours to keep in retirement.
Why a Roth IRA Is So Powerful
A Roth IRA is funded with after-tax dollars, which means qualified withdrawals in retirement — including all the investment growth — are completely tax-free. Over decades, the growth typically dwarfs the contributions, so paying tax now on the smaller seed and skipping tax on the larger harvest is a powerful deal for many savers.
Contributions vs. Growth
Someone who contributes $7,000 a year for 35 years puts in $245,000 — but at a 7% return the account can grow past $1 million. With a Roth, every dollar of that growth is yours, with no tax due on withdrawal after age 59½ (and a five-year holding period).
Tip: Roth IRAs have no required minimum distributions during your lifetime, making them excellent for estate planning and for letting money compound tax-free as long as possible.
Income and Contribution Limits
The IRS caps annual Roth contributions and phases out eligibility at higher incomes. Higher earners can sometimes use a "backdoor" Roth conversion. Check the current year's limits, since they adjust for inflation over time.
Frequently Asked Questions
What makes a Roth IRA different from a traditional IRA?
Roth contributions are made with after-tax money, so qualified withdrawals — including growth — are tax-free in retirement. Traditional IRA contributions may be tax-deductible now, but withdrawals are taxed later. Roth is often better if you expect to be in a similar or higher tax bracket in retirement.
How much can I contribute to a Roth IRA?
The IRS sets an annual limit that adjusts most years, with an extra catch-up amount for those 50 and older. Your ability to contribute phases out above certain income levels. This calculator lets you model any contribution up to the cap.
When can I withdraw from a Roth IRA tax-free?
Qualified tax-free withdrawals require you to be at least 59½ and to have held the account for at least five years. You can withdraw your own contributions (not earnings) at any time without tax or penalty, which adds flexibility.
Does a Roth IRA have required minimum distributions?
No. Unlike traditional IRAs and 401(k)s, Roth IRAs have no required minimum distributions during the original owner's lifetime, so the money can keep compounding tax-free for as long as you like.
Should I choose a Roth IRA or a 401(k)?
Many people do both: contribute enough to a 401(k) to get the full employer match, then fund a Roth IRA for tax-free growth and flexibility. If you still have room, return to the 401(k). The right mix depends on your tax situation.