Roth IRA Growth Calculator

A Roth IRA is a tax-advantaged individual retirement account funded with after-tax dollars.
Because the tax is already paid going in, withdrawals in retirement are completely tax-free, growth included. Over a few decades that growth is most of the balance, which is the whole point.

The growth formula (compound interest): Future Value = P × (1 + r)^n + PMT × ((1 + r)^n − 1) / r

Where:

• P = initial balance (principal)
• PMT = annual contribution
• r = annual return rate (use historical stock market average: 7% real, 10% nominal)
• n = years until retirement

2026 Roth IRA contribution limits:

• Under age 50: $7,500/year
• Age 50 and over: $8,600/year ($7,500 plus a $1,100 catch-up contribution)
• Income phase-out (single): $153,000–$168,000 MAGI (Modified Adjusted Gross Income)
• Income phase-out (married filing jointly): $242,000–$252,000 MAGI

These are re-set every autumn, so check irs.gov for the year you are actually contributing in.

Worked example: The example below uses $7,000 rather than the current $7,500 cap, because nobody contributes the 2026 maximum for forty straight years. The limit moves; treat the number as a round figure.

25-year-old contributes $7,000/year for 40 years (until 65), 7% average annual return, starting from $0: FV = 0 + 7,000 × ((1.07)^40 − 1) / 0.07 = 7,000 × (14.974458 − 1) / 0.07 = 7,000 × 199.63512 = $1,397,446

Total contributions: $7,000 × 40 = $280,000 Tax-free growth: $1,117,446

If started at age 35 instead (30 years): FV = 7,000 × ((1.07)^30 − 1) / 0.07 = $661,226

Starting 10 years earlier does not merely double the outcome, it more than doubles it: $1,397,446 against $661,226. The extra decade cost $70,000 in contributions and returned $736,000. That is the whole argument for starting early, in one line.

Roth vs Traditional IRA: Roth wins if you expect to be in a higher tax bracket in retirement. Traditional wins if you expect to be in a lower bracket. For young earners in low brackets, Roth is almost always optimal.