How Much Does a Roth IRA Actually Save You in Taxes?
A Roth IRA lets you invest after-tax dollars and then withdraw both your contributions and all investment growth completely tax-free in retirement, as long as the withdrawal is qualified. That's a powerful advantage compared to a regular taxable brokerage account, where your investment gains get taxed along the way. This calculator takes your annual contribution, years invested, and expected return, then estimates how much tax the Roth IRA's tax-free growth saves you compared to investing the same amount in a taxable account.
The math assumes you contribute the same amount every year and it compounds at your expected return, giving a projected total balance. Subtracting your total contributions from that balance gives your total investment gain. In the Roth IRA, that entire gain comes out tax-free. In a taxable account, this calculator applies a 15% long-term capital gains tax rate — the most common federal bracket — to the same gain, and the difference between the two after-tax outcomes is your estimated tax savings.
Contribution limits for 2025 are $7,000 per year under age 50, or $8,000 with the $1,000 catch-up contribution at 50 and older, and those limits phase out at higher incomes. This calculator is a simplified simulation that assumes even annual contributions and a steady return, so actual results will vary with market performance and your specific tax situation — check IRS.gov or a tax professional for your exact numbers.
Frequently Asked Questions
Yes. For 2025, the limit is $7,000 per year if you're under 50, and $8,000 per year if you're 50 or older, thanks to a $1,000 catch-up contribution. These limits are indexed and can rise over time.
Yes, as long as it's a qualified withdrawal — generally once you're 59½ and the account has been open at least 5 years. Contributions and all investment growth come out completely free of federal income tax.
No — Roth IRA contributions phase out at higher income levels (for 2025, roughly $150,000-$165,000 for single filers and $236,000-$246,000 for married filing jointly). Check the current IRS limits for your filing status before contributing.