Roth IRA Calculator

A Roth IRA is a retirement account funded with after-tax dollars, allowing tax-free growth and withdrawals in retirement. Traditional IRAs use pre-tax dollars and tax withdrawals later. Key difference: Roth = pay taxes now, withdraw tax-free later; Traditional = deduct now, pay taxes later. Roth is often better for younger earners expecting higher future tax rates.

For 2024, single filers can contribute fully if MAGI (Modified Adjusted Gross Income) is under $146,000, with reduced contributions up to $161,000 (phaseout). Married filing jointly: full contribution under $230,000, phaseout up to $240,000. Above these limits? Consider the 'backdoor Roth IRA' strategy—contribute to a Traditional IRA, then convert to Roth.

The 2024 limit is $7,000 per year ($7,500 if you're 50 or older). You can contribute until the tax filing deadline (typically April 15) for the previous year. You can only contribute up to your taxable earned income—if you earn $5,000, that's your max. Spousal IRAs allow non-working spouses to contribute based on the working spouse's income.

Contributions (the money you put in) can be withdrawn anytime, tax-free and penalty-free. Earnings require the account to be open 5+ years AND you must be 59½ or older. Exceptions for earnings include: first-time home purchase ($10,000 lifetime limit), disability, or qualified education expenses. Early earnings withdrawal = 10% penalty + taxes.

Priority order: 1) 401(k) up to employer match (free money), 2) Max out Roth IRA ($7,000), 3) Return to 401(k) up to limit. Roth IRA advantages over 401(k): more investment choices, no required minimum distributions, penalty-free contribution withdrawal. If you can only do one and earn below income limits, Roth IRA often offers more flexibility.