Roth IRA Calculator

Understanding Roth IRAs

A Roth IRA is a retirement savings account that offers tax-free growth and withdrawals in retirement. Unlike traditional IRAs, contributions are made with after-tax dollars, but qualified withdrawals are completely tax-free.

Key Features of Roth IRAs

• Tax-Free Withdrawals: Qualified withdrawals of both contributions and earnings are completely tax-free in retirement.
• No Required Minimum Distributions (RMDs): Unlike traditional IRAs, you're not required to withdraw money at any age.
• Flexible Withdrawals: You can withdraw your contributions at any time without penalty, though earnings are subject to different rules.
• Estate Planning Benefits: Roth IRAs can be passed to heirs with tax advantages.
• Income Limits: Eligibility to contribute is based on modified adjusted gross income (MAGI).

Contribution Rules

• Annual Limits: For 2025, the maximum contribution is $7,000 ($8,000 if age 50 or older).
• Income Phase-Out: For 2025, the ability to contribute begins to phase out at $146,000 for single filers and $230,000 for married filing jointly.
• Earned Income Requirement: You must have earned income to contribute to a Roth IRA.
• Spousal IRAs: Non-working spouses can contribute based on the working spouse's income.
• Contribution Deadline: Contributions can be made until the tax filing deadline for the previous year.

Withdrawal Rules

• Qualified Distributions: Tax and penalty-free withdrawals after age 59½ and 5-year holding period.
• Early Withdrawals: Contributions can be withdrawn anytime, but earnings may be subject to taxes and penalties.
• Exceptions: Early withdrawal penalties may be waived for certain situations like first-time home purchase, qualified education expenses, or unreimbursed medical expenses.
• 5-Year Rule: The 5-year holding period begins on January 1st of the first year you made a contribution.
• Conversion Rules: Funds converted from traditional IRAs have their own 5-year waiting period.