1. What is Roth Investment?

A Roth IRA or 401(k) is a retirement account where you contribute after-tax dollars, allowing for tax-free growth and withdrawals in retirement. This calculator estimates the future value of regular contributions to a Roth account.

2. How Does the Calculator Work?

The calculator uses the future value of an annuity formula:

Where:

• \( Contribution \) — Annual contribution amount (USD)
• \( r \) — Annual rate of return (decimal)
• \( n \) — Number of years invested

Explanation: The formula calculates the future value of a series of equal annual contributions earning a constant rate of return.

3. Benefits of Roth Accounts

Details: Roth accounts offer tax-free growth, no required minimum distributions (RMDs), and flexibility to withdraw contributions penalty-free.

4. Using the Calculator

Tips: Enter annual contribution in USD, expected annual return rate as a decimal (e.g., 0.07 for 7%), and number of years you plan to contribute.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between Roth and traditional retirement accounts?
A: Traditional accounts use pre-tax dollars (taxed on withdrawal) while Roth uses after-tax dollars (tax-free withdrawals).

Q2: What are the contribution limits for Roth accounts?
A: For 2023, $6,500 ($7,500 if 50+) for IRAs and $22,500 ($30,000 if 50+) for 401(k)s.

Q3: Are there income limits for Roth contributions?
A: Yes, for Roth IRAs but not for Roth 401(k)s. Limits change annually.

Q4: How should I choose my expected return rate?
A: Historically, stock market returns average 7-10% annually, but past performance doesn't guarantee future results.

Q5: Does this account for inflation?
A: No, the results are in nominal dollars. For real value, subtract expected inflation from your return rate.