What a Roth IRA Is, In One Paragraph
A Roth IRA is a retirement account where you contribute after-tax money — meaning you've already paid income tax on it — and in exchange, every dollar the account ever earns (interest, dividends, capital gains) is permanently tax-free at withdrawal. Once you're 59½ and the account has been open at least 5 years, you can withdraw the entire balance without owing the IRS another cent. That's the whole pitch: pay tax once, never again on the growth.
The Microapp Roth IRA Calculator projects what your account will be worth at retirement, assuming you contribute consistently and earn a steady return.
How the Math Works
The projection combines two compound-interest streams:
- Your existing balance compounds annually at your assumed return rate. Future value of starting balance =
start × (1 + r)^years. - Your annual contributions form an annuity — each year's contribution gets a different number of years to grow. Future value of contributions =
annual × ((1 + r)^years − 1) / r.
Add them together and you have the projected balance. The tool does this instantly as you change any input.
• Contributions over 35 years: $7,000 × 35 = $245,000
• Future value of those contributions: $7,000 × ((1.07^35 − 1) / 0.07) ≈ $967,000
• You contributed $245k; the market did the rest (~$722k of growth)
• All of it withdrawable tax-free.
Why Roth Beats Traditional for Most People Early in Their Careers
The IRA decision comes down to one question: are you in a higher tax bracket now or at retirement?
Traditional IRA: deduct contributions now (tax savings today), pay tax on withdrawals later. Wins if your tax rate at retirement is lower than today.
Roth IRA: no deduction now (full tax now), no tax on withdrawals later. Wins if your tax rate at retirement is higher than today.
For someone in their 20s or 30s earning a normal salary, the future-tax-rate question almost always favors Roth. Future-you is likely earning more, in a higher bracket, AND federal tax rates are historically low right now (the 2017 cuts expire after 2025). Locking in today's lower bracket via Roth makes sense.
The 2026 Contribution Limits
| Age | Annual limit | Income phase-out (single) | Income phase-out (married filing jointly) |
|---|---|---|---|
| Under 50 | $7,000 | $165k–$180k | $246k–$256k |
| 50 and older | $8,000 (extra $1,000 catch-up) | same | same |
If your income is above the phase-out range, you can't contribute to a Roth directly — but the "backdoor Roth" workaround (contribute to a traditional IRA, then convert to Roth) is still legal and widely used.
The Real Power: Time, Not Contribution Size
Two scenarios, both ending at 65:
| Strategy | Years contributing | Total contributed | Final balance @ 7% |
|---|---|---|---|
| Start at 25, contribute $5,000/year until 35, then stop | 10 | $50,000 | ~$602,000 |
| Start at 35, contribute $5,000/year through 65 | 30 | $150,000 | ~$510,000 |
The early starter contributed one-third as much money but ended up with more. That's compound interest doing its job. Starting early is the single highest-leverage retirement decision.
Common Mistakes
Confusing the contribution limit with the household limit. The $7k limit is per person. A married couple where both spouses are eligible can contribute $14k combined ($16k if both are 50+).
Forgetting the 5-year rule. Roth withdrawal benefits require both age 59½ AND that the account has been open 5+ years. If you open a Roth at 58, you can't withdraw earnings tax-free at 60 — you have to wait until 63.
Assuming returns are linear. The market doesn't return 7% every year — it averages 7% over decades while bouncing -30% to +40% in any single year. Projections are smoothed; reality has bumps. Don't panic-sell during downturns; that's when Roth contributions buy the most shares.
Not investing the money. A Roth IRA is a type of account, not an investment. The cash you contribute sits in a money-market fund earning ~5% unless you actively invest it in stocks, ETFs, or bonds. If you opened a Roth and the balance hasn't grown, check that the money is actually invested.
Related Tools
For non-IRA-specific compound interest projections, use the Compound Interest Calculator. To project loan repayments alongside retirement saving, the Loan Calculator helps balance debt vs investing decisions. For raw percentage math (return-rate calculations, allocation %), see the Percentage Calculator.