• Questionnaire
  • Save

There are many ways that Millennials and others are investing for their future. One of the best ways for young people to start saving for retirement now is with a Roth IRA.

If you're concerned about finding out whether or not a Roth IRA is best for you, then we've got all the answers you need. Use this calculator to assess your situation and continue reading for some great tips.


Why use a roth IRA calculator?

Using a Roth IRA calculator like ours is a great way to start the process of considering what you might be able to gain by contributing to your own Roth IRA.

The calculator will allow you to see the comparison between your potential Roth IRA value and taxable savings value at retirement.

Having this clarity about your options will be invaluable to you as you decide which retirement option is the best for you.

You can also use a Roth calculator in conjunction with other calculators, like a 401(k) calculator to weigh your options for possible retirement accounts.

These calculators will help you to see how other retirement options compare with one another.

What is a roth IRA?

A Roth IRA is a different kind of retirement account which you contribute to with your post-tax income.

All of the money you put in is your money, the IRA isn't subsidized by anything other than what you put into it. No government loans or tax breaks, just your money.

There are typically great interest rates attached to Roth IRAs that allow the value of your account to grow significantly over time.

An example that is often given is that a 20-year-old person who puts away $5,000 a year in Roth contributions for a decade and then stops could be a millionaire by the time he or she reaches retirement age.

Roth IRAs are popular retirement account options for young people because of this. These accounts allow them to put in however much money they want for however long they want and stop whenever they want completely penalty-free.

Is there an income limit for Roth IRA accounts?

There are income-based requirements to be eligible to contribute to a Roth IRA. You must contribute earned income, and you cannot contribute more than your earned income.

If your earned income is less than the $5,500 annual contribution limit, then you will only be able to contribute up to the amount you earned.

Also, for single folks, your income must be less than $135,000 to contribute to a Roth IRA. If you are married filing jointly, your income must be less than $199,000.

What's the difference between roth and traditional IRAs?

If you've heard of Roth IRAs before, you may or may not be aware that they are actually a variation of a traditional IRA. So what's the difference? It mainly comes down to taxes.

With a traditional IRA, you may qualify to receive some tax deductions for your contributions. However, you also will have to pay income tax when you withdraw for your retirement.

Not so with a Roth IRA. All of your contributions will be from post-tax income, so you can't receive any deductions for them. But you also will not be required to pay any income tax when you withdraw from your account.

Roth IRAs are also significantly more flexible than traditional IRAs.

If you want to withdraw early from a traditional account, you won't be able to do so without paying a penalty. Roth accounts, on the other hand, are able to be withdrawn from at any time, completely penalty-free.

There are some other differences, but these are the main ones that will affect you and your retirement. When deciding which IRA is right for you, you will need to weigh the pros and cons of both, as well as any other options you are considering.

How does a roth IRA compare to a 401(k)?

If your place of work provides the option to contribute to a 401(k), you should consider the differences between that and a Roth account before choosing between them, or end up choosing both.

401(k)s allow you to contribute more annually than IRAs, nearly four times as much actually. Certain employers may match your contributions as well, potentially making your account more valuable.

However, you are much more limited with a 401(k) than you are with a Roth IRA. You have limited investments and will also have to pay normal income taxes on your distributions.

There are pros and cons to contributing to both types of accounts. However, you don't actually have to choose between them.

If your place fo work matches your 401(k) contributions, it may be most beneficial for you to contribute until the matching limit, and then start making contributions to a Roth IRA. You may be able to get the best of both worlds there.

Tell your friends about us!