How this instrument works
A Roth IRA is funded with money that has already been taxed, so the arithmetic runs in the opposite direction from a Traditional IRA or a 401(k): there is no upfront deduction, but a qualified withdrawal in retirement owes nothing further to the IRS, growth included. That reversal is why the account tends to suit a saver early in a career and in a low tax bracket now, betting that today's rate beats whatever rate applies decades later — the same logic behind the golden scenario this instrument is built to check, a $20,000 balance adding $500 a month at 7% for 30 years. A saver signs this account up for themselves, choosing the brokerage and the fund lineup without any payroll office in the loop, which is why nothing here adds a matching contribution on top of what's typed into Monthly contribution, $.
The instrument compounds monthly rather than once a year, because that is how most Roth IRA deposits actually arrive — an automatic transfer set up alongside a paycheck, not a single lump sum dropped in each December. Expected annual return, % is divided by 1,200 to become a monthly decimal rate, and Years until withdrawal is multiplied by 12 to become a month count, so the same annuity shape that prices a mortgage or a loan payment here prices a savings stream instead: the starting balance keeps compounding on its own untouched, while every fresh deposit only gets credit for the stretch of months still ahead of it once it lands, not the full 360.
Three things sit outside this formula on purpose. It never clamps Monthly contribution, $ against the IRS's annual Roth limit — the way a general IRA projection on this site does with a hard $7,000-a-year cap — so a figure typed in above the legal monthly equivalent will still compound without complaint. It does not test the income ceiling that phases Roth eligibility out for higher earners, and it does not check the five-year holding rule or the age-59½ threshold that determine whether a withdrawal actually qualifies as tax-free rather than triggering an ordinary-income tax bill on top of the 10% early-withdrawal penalty.
- Enter what's already sitting in the account under Current Roth IRA balance, $.
- Fill in Monthly contribution, $ with a per-month deposit figure — not the yearly total some plans quote instead.
- Enter Expected annual return, % — one steady annual figure applied every month of the horizon.
- Set Years until withdrawal to how long the money has left to grow before you touch it.
- Read Projected tax-free balance, $ — assuming a qualified withdrawal, that full figure is yours to keep.
Worked example — $20,000 plus $500 a month for 30 years
Current Roth IRA balance, $ starts at 20,000 and Monthly contribution, $ sits at 500; the saver figures on a steady 7 percent, held for a 30-year stretch before Years until withdrawal hits zero. That makes r = 7 ⁄ 1200 = 0.005833 and N = 360 months. Run those through FV = PV(1+r)ᴺ + PMT·((1+r)ᴺ − 1) ⁄ r and Projected tax-free balance, $ reads $772,315.45 — every cent of it withdrawable without an additional tax bill, since Roth contributions were already taxed on the way in.
Split the two pieces to see where the total comes from. The same 30-year run started from a zero balance, with only the $500 monthly deposit compounding, reaches $609,985.50 on its own — meaning the $20,000 the account opened with only added about $162,330, less than a quarter of the final figure. Shorten the horizon instead: the identical $20,000-plus-$500 sheet run for 15 years rather than 30 lands at $215,460.08 — well under a third of the 30-year total, since a dollar left untouched for the second fifteen years piles gains on top of gains that the first fifteen years never had time to build.
Questions
How is a Roth IRA projection different from a Traditional IRA projection here?
The compounding math is identical, but what the final number means is not. Because Roth contributions are made with money already taxed, Projected tax-free balance, $ is what a qualified withdrawal actually puts in your pocket. Run the same inputs through a Traditional-account projection and the look-alike figure is pre-tax — ordinary income tax comes out of it later, so the two totals are not directly comparable dollar for dollar.
Why does this calculator compound monthly instead of once a year?
Because that is how a Roth IRA is actually funded in practice — an automatic transfer alongside a paycheck, not one deposit a year. Expected annual return, % becomes a monthly rate by dividing by 1,200, and Years until withdrawal becomes a month count by multiplying by 12, so Monthly contribution, $ compounds for however many months remain after each deposit lands rather than waiting a full year to start earning.
Does this calculator enforce the IRS's annual Roth contribution limit?
No. Monthly contribution, $ compounds however high you set it, with no clamp against the legal ceiling — roughly $583 a month for savers under 50 at the current $7,000 annual limit, more with the catch-up allowance at 50 and older. Setting the field above that monthly equivalent will still run and will overstate what a Roth account could legally hold.
Does it check the five-year rule or the income limit on Roth eligibility?
No. Roth eligibility phases out above IRS income thresholds, and even an eligible saver needs the account open five years and to be at least 59½ before earnings can come out tax-free; missing either condition means the growth slice of a withdrawal loses its tax-free status and picks up an early-distribution penalty of 10% besides. Projected tax-free balance, $ assumes the withdrawal fully qualifies — it does not verify either rule.
A 401(k) sheet has a match input — why doesn't this one?
A Roth IRA is a personal account a saver signs up for on their own, at a brokerage of their choosing, with no payroll office matching a percentage of it. Common openers include a contractor who has no benefits desk to enroll through, someone who already maxed a 401(k) and wants a second sheltered bucket, or an early-career earner in a low tax bracket. That structure is why Monthly contribution, $ carries the whole deposit stream — nothing arrives on top of it.
What if I need to withdraw money before Years until withdrawal is up?
Roth rules let you pull out your own contributions — the money you put in, not what it earned — at any age, for any reason, tax- and penalty-free, since that portion was already taxed. Withdrawing earnings early is a different matter and can trigger tax plus a 10% penalty absent an exception. Projected tax-free balance, $ assumes the money stays put for the full horizon, not a partial early exit.
References
- IRS — Roth IRAs: eligibility, contribution and withdrawal rules
- IRS — Retirement topics: IRA contribution limits
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.