1. What is a Roth IRA?

A Roth IRA is an individual retirement account that allows you to contribute after-tax dollars and enjoy tax-free growth and withdrawals in retirement. Unlike traditional IRAs, qualified distributions from Roth IRAs are tax-free.

2. How Does the Calculator Work?

The calculator uses the Roth IRA future value formula:

Where:

• \( Contributions \) — Annual contributions to the Roth IRA
• \( r \) — Annual rate of return (as a decimal)
• \( t \) — Time period in years

Explanation: The formula calculates the tax-free growth of your contributions over time, showing the power of compound interest in a Roth IRA.

3. Benefits of Roth IRA

Details: Roth IRAs offer tax-free withdrawals in retirement, no required minimum distributions (RMDs), and flexibility to withdraw contributions (but not earnings) penalty-free before retirement.

4. Using the Calculator

Tips: Enter your annual contributions in dollars, expected annual return rate as a percentage, and the number of years you plan to contribute. The calculator will show your projected tax-free future value.

5. Frequently Asked Questions (FAQ)

Q1: What are the contribution limits for 2025?
A: For 2025, the contribution limit is $7,000 ($8,000 if age 50 or older), subject to income limits.

Q2: Can I contribute to both a Roth and traditional IRA?
A: Yes, but your total contributions to all IRAs cannot exceed the annual limit.

Q3: What's the difference between Roth and traditional IRA?
A: Traditional IRAs offer tax-deductible contributions but taxable withdrawals, while Roth IRAs use after-tax money but offer tax-free withdrawals.

Q4: Are there income limits for Roth IRA contributions?
A: Yes, for 2025, phase-outs begin at $146,000 for single filers and $230,000 for married filing jointly.

Q5: When can I withdraw earnings tax-free?
A: After age 59½ and the account has been open for at least 5 years (the 5-year rule).