Roth IRA Calculator
Calculate the future value of your Roth IRA based on contributions and expected returns.
What is a Roth IRA?
A Roth IRA is a type of retirement account where you can save money and grow it tax-free. Unlike regular savings accounts or some other types of retirement accounts, the money you withdraw from a Roth IRA in retirement isn’t taxed. This means you keep more of your savings when you retire!
What is the Roth IRA Calculator?
The Roth IRA Calculator helps you figure out how much money you will have in your Roth IRA when you retire. It calculates your future savings based on how much you contribute every year, how much your contributions grow each year, and how long you plan to save.
How the Roth IRA Calculator Works
To use the Roth IRA Calculator, you need to enter the following details:
- Your Current Age: How old you are right now.
- Your Retirement Age: The age when you plan to retire.
- Current IRA Balance: The amount of money you already have in your Roth IRA.
- Annual Contribution: The amount of money you plan to contribute to your Roth IRA every year.
- Expected Annual Return: The percentage growth you expect on your savings every year (like interest or investment gains).
- Annual Contribution Increase: How much you plan to increase your annual contributions each year.
Once you enter these details, the calculator will show you how much your Roth IRA will grow by the time you retire. It also shows how much of your total balance came from your own contributions and how much came from your earnings (like interest or investment returns).
How the Roth IRA Calculator Works
The calculator uses a simple formula to estimate the future value of your Roth IRA. It adds your annual contributions to the growing balance, and the balance grows each year by the expected return rate. It also increases your contributions each year by the amount you entered for the contribution increase.
Frequently Asked Questions (FAQs)
- What is a Roth IRA?
A Roth IRA is a special retirement account that lets your savings grow tax-free. When you retire and take out the money, you don’t have to pay taxes on it. - How do I use the Roth IRA Calculator?
Enter your current age, when you plan to retire, how much you have saved already, how much you will contribute each year, and your expected returns. The calculator will show you how much money you’ll have when you retire. - What happens if I increase my contributions each year?
If you increase your contributions each year, the calculator will show how that helps your savings grow faster. For example, you might start by saving $6,500 a year, but then increase it by 2% each year. - Why does the Roth IRA Calculator show both total contributions and total earnings?
The total contributions show how much of the money you saved yourself, while the total earnings show how much money your savings made through growth and interest over time. - Can I withdraw money from my Roth IRA before retirement?
You can withdraw contributions (the money you put in) anytime without paying taxes or penalties. But if you withdraw the earnings (the money your savings made), you might have to pay taxes and penalties unless you’re over 59½ and have had the account for at least 5 years.
For more information on Roth IRAs, you can check out Wikipedia's article on Roth IRAs.