Roth IRA Calculator

The fundamental difference is when you pay taxes. A Roth IRA taxes you now and lets you withdraw tax-free later. A Traditional IRA gives you a tax break now but taxes you on every dollar you withdraw in retirement. Both accounts let your investments grow tax-deferred in the meantime.

Side-by-side comparison:

• Tax deduction on contributions: Traditional IRA — yes (reduces your taxable income today). Roth IRA — no.
• Tax on withdrawals: Traditional IRA — yes, taxed as ordinary income at your retirement tax rate. Roth IRA — no, completely tax-free.
• Required Minimum Distributions: Traditional IRA — yes, starting at age 73 (as of 2025). Roth IRA — none.
• Contribution limits (2025): Both — $7,000 under 50, $8,000 age 50+ (combined limit across all IRAs).
• Income limits for contributions: Roth IRA — yes, phases out at higher incomes. Traditional IRA — anyone can contribute, but the tax deduction phases out if you have a workplace retirement plan.
• Early withdrawal: Roth IRA — you can withdraw contributions (not gains) at any time, penalty-free. Traditional IRA — 10% penalty plus income taxes on all withdrawals before age 59½.

The math behind the comparison: If your current tax rate and retirement tax rate are identical, Roth and Traditional produce exactly the same after-tax result (assuming you invest the Traditional's tax savings). The Roth wins when your retirement tax rate is higher than your current rate. The Traditional wins when your current rate is higher than your retirement rate. This calculator models that comparison precisely.

Beyond the math: Even when the numbers are close, Roth has structural advantages: no RMDs give you more control in retirement, tax-free withdrawals make retirement budgeting simpler, and the flexibility to withdraw contributions early provides a safety net. Many financial planners recommend Roth for younger workers even if the pure tax math is a toss-up.

The IRS sets annual contribution limits for IRAs that apply across all your Traditional and Roth IRAs combined. For 2025, the limits are:

• Under age 50: $7,000 per year. This is the maximum you can contribute across all your Traditional and Roth IRAs combined. If you put $3,000 in a Traditional IRA, you can only put $4,000 in a Roth IRA.
• Age 50 and older: $8,000 per year (includes a $1,000 catch-up contribution). This extra $1,000 is designed to help people closer to retirement boost their savings.

Important rules about the contribution limit:

• Earned income requirement: You must have earned income (wages, salary, self-employment income) at least equal to your contribution. If you earn $5,000, you can only contribute $5,000 even though the limit is $7,000.
• Contribution deadline: You can make IRA contributions for 2025 up until the tax filing deadline in April 2026. This gives you extra time to fund your account.
• Excess contributions: Contributing more than the limit triggers a 6% excise tax per year on the excess amount until it's corrected. If you accidentally over-contribute, withdraw the excess (plus any earnings on it) before the tax filing deadline.
• Spousal IRA: Even if your spouse has no earned income, you can contribute to a Roth IRA in their name as long as you file jointly and your combined earned income covers both contributions. This effectively doubles the household's Roth contribution capacity.

Historical context: The IRA contribution limit was just $2,000 from 1981 through 2001. It has gradually increased and is now adjusted periodically for inflation. The catch-up contribution for those 50+ was introduced in 2002 as part of EGTRRA (the Economic Growth and Tax Relief Reconciliation Act).

Unlike Traditional IRAs (where anyone can contribute regardless of income), Roth IRAs have income-based phase-out ranges that reduce or eliminate your ability to contribute directly. For 2025:

• Single filers: Full contribution allowed below $150,000 MAGI. Reduced contribution between $150,000 and $165,000. No direct contribution above $165,000.
• Married Filing Jointly: Full contribution allowed below $236,000 MAGI. Reduced contribution between $236,000 and $246,000. No direct contribution above $246,000.

How the phase-out works: If your Modified Adjusted Gross Income (MAGI) falls within the phase-out range, your maximum contribution is reduced proportionally. For example, a single filer earning $157,500 is exactly halfway through the $150,000–$165,000 range, so their limit is reduced by 50% to $3,500.

What is MAGI? Modified Adjusted Gross Income is your Adjusted Gross Income (AGI) with certain deductions added back, such as student loan interest, tuition deductions, and foreign earned income exclusion. For most W-2 employees, MAGI is very close to their AGI. It does not include Traditional IRA contributions or standard/itemized deductions.

If you earn too much: You still have options. The most popular is the backdoor Roth IRA conversion (see the next question). You can also contribute to a Roth 401(k) through your employer, which has no income limit and allows much larger contributions ($23,500 in 2025, or $31,000 if 50+).

The backdoor Roth IRA is a legal strategy that allows high-income earners to get money into a Roth IRA even when their income exceeds the direct contribution limits. It exploits the fact that while direct Roth contributions have income limits, Roth conversions do not.

The two-step process:

• Step 1: Contribute to a Traditional IRA. There is no income limit for making a non-deductible Traditional IRA contribution. You contribute $7,000 (or $8,000 if 50+) of after-tax money to a Traditional IRA.
• Step 2: Convert the Traditional IRA to a Roth IRA. There is no income limit on conversions. The money moves from the Traditional IRA into your Roth IRA. Since you already paid taxes on the contribution (it was non-deductible), you only owe taxes on any gains that occurred between step 1 and step 2.

Critical pitfall — the Pro-Rata Rule: If you have any existing pre-tax money in any Traditional IRA (including SEP-IRAs and SIMPLE IRAs), the IRS treats all your Traditional IRAs as one pool when calculating the tax on a conversion. This means you can't just convert the non-deductible portion — a proportional share of pre-tax money gets included, triggering a tax bill.

• Example: You have a $93,000 pre-tax Traditional IRA and you make a $7,000 non-deductible contribution. Your total Traditional IRA balance is $100,000, of which 7% is after-tax. If you convert $7,000, only 7% ($490) is tax-free; the other 93% ($6,510) is taxable.
• Solution: Roll your existing pre-tax Traditional IRA money into your employer's 401(k) before doing the backdoor Roth. 401(k) balances are not counted in the pro-rata calculation. This "cleans out" your Traditional IRA and makes the backdoor Roth fully tax-free.

Timing tip: Many people do both steps in the same week (or even the same day) to minimize any taxable gains between contribution and conversion. Some brokerages even allow you to automate the process.

Is the backdoor Roth legal? Yes. Congress has been aware of this strategy for over a decade. The Build Back Better Act (2021) attempted to close the backdoor Roth loophole but failed to pass. As of 2025, it remains fully legal and widely used.

The Roth IRA actually has two different 5-year rules, and confusing them is one of the most common mistakes. Both determine when you can withdraw money tax-free and penalty-free.

Rule 1: The 5-year rule for contributions (earnings withdrawals):

• To withdraw earnings (investment gains) tax-free and penalty-free, your Roth IRA must have been open for at least 5 tax years AND you must be at least 59½. Both conditions must be met.
• The 5-year clock starts on January 1 of the tax year for which you made your first-ever Roth IRA contribution. If you open your first Roth IRA in December 2025, the clock starts January 1, 2025, and you satisfy the rule on January 1, 2030.
• Important: You can always withdraw your contributions (the money you put in) at any time, for any reason, with no tax or penalty. The 5-year rule only applies to earnings.

Rule 2: The 5-year rule for Roth conversions:

• Each Roth conversion has its own separate 5-year waiting period. If you withdraw converted money before 5 years and before age 59½, you owe a 10% early withdrawal penalty (but no income tax, since you already paid tax on the conversion).
• This rule is particularly relevant for people doing backdoor Roth conversions or converting large Traditional IRA balances. Each conversion amount has its own 5-year clock.
• After age 59½, this rule no longer applies — you can withdraw any converted amount penalty-free regardless of when the conversion happened.

Practical impact: For most people who open a Roth IRA in their 20s or 30s and plan to withdraw in their 60s, the 5-year rule is a non-issue — decades will have passed by retirement. It mainly matters for late starters (opening a Roth IRA after 55) or people doing Roth conversion ladders for early retirement.

The Roth vs. Traditional decision ultimately comes down to a single question: will your tax rate be higher now or in retirement? But there are several structural advantages that tilt the scales toward Roth in many real-world scenarios.

Roth clearly wins when:

• You expect your retirement tax rate to be higher: If you're early in your career earning $60,000 (22% bracket) but expect to earn much more later, locking in today's lower rate via Roth is smart. Your retirement income from Social Security, pensions, and required distributions could push you into a higher bracket.
• You expect tax rates to increase broadly: Federal tax rates are historically low. The Tax Cuts and Jobs Act rates are scheduled to expire after 2025, which could push rates back up. If you believe future tax rates will be higher across the board, Roth locks in today's rates.
• You have a long time horizon: The longer your money compounds, the greater the proportion of your balance that is tax-free growth (rather than contributions). A 25-year-old contributing $7,000/year for 40 years at 7% will have ~$280,000 in contributions and ~$1.2M in tax-free gains.
• You want no RMDs: Traditional IRAs force you to start withdrawing at age 73, whether you need the money or not. These forced withdrawals increase your taxable income, potentially pushing you into a higher bracket and increasing Medicare premiums (IRMAA surcharges). Roth IRAs have no RMDs.
• You want estate planning flexibility: Roth IRAs pass to heirs income-tax-free (though heirs must withdraw within 10 years under SECURE Act rules). Traditional IRA beneficiaries pay income tax on every dollar they withdraw.

Traditional wins when:

• You're at peak earnings and in a high bracket: If you're in the 32% or 35% bracket now and expect to be in the 22% bracket in retirement, the Traditional IRA's upfront deduction saves more tax than the Roth's tax-free withdrawal.
• You'll have very low income in retirement: If you plan to live on minimal withdrawals in a low cost-of-living area, your retirement tax rate could be close to 0%, making the Traditional deduction a pure win.
• You need the tax deduction to reduce current AGI: Lower AGI can help you qualify for other tax benefits like student loan interest deduction, child tax credits, or ACA premium subsidies.

The tiebreaker: When tax rates are roughly equal, the Roth still has an edge due to no RMDs, easier estate planning, and the flexibility to withdraw contributions at any time. Many financial planners call Roth the "safer bet" when the math is close.

Yes, absolutely. Roth IRA contributions and employer-sponsored 401(k) contributions have completely separate limits and there is no rule preventing you from maxing out both in the same year. In fact, doing so is one of the most effective retirement savings strategies available.

2025 combined maximums:

• Roth IRA: $7,000 ($8,000 if 50+)
• 401(k) employee contribution: $23,500 ($31,000 if 50+)
• Combined personal maximum: $30,500 ($39,000 if 50+), not counting employer match
• 401(k) total limit (incl. employer match): $70,000 ($77,500 if 50+)

Optimal order of operations for retirement savings:

• Step 1: Contribute enough to your 401(k) to get the full employer match. This is free money — a guaranteed 50–100% return.
• Step 2: Max out your Roth IRA ($7,000 or $8,000). The tax-free growth and withdrawal benefits are unmatched, and there are no RMDs.
• Step 3: Go back and max out the rest of your 401(k) ($23,500 total employee contribution).
• Step 4: If you still have money to invest, use a taxable brokerage account, HSA (if eligible), or mega backdoor Roth (if your 401(k) plan allows after-tax contributions).

One caveat: The Roth IRA income limits still apply even if you have a 401(k). If your income exceeds the phase-out range, you can't contribute directly to a Roth IRA — but you can use the backdoor Roth strategy or contribute to a Roth 401(k) option within your employer's plan (which has no income limit).