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Project your Roth IRA tax-free growth and compare it to a Traditional IRA to see the long-term benefit.
Roth IRA Future Value:
FV = P(1 + r/12)^(12t) + PMT × [(1 + r/12)^(12t) - 1] / (r/12)
Roth contributions are after-tax. All growth and qualified withdrawals are completely tax-free.
A Roth IRA is a retirement account where you contribute after-tax dollars. Your money grows tax-free, and qualified withdrawals in retirement are 100% tax-free, including all growth.
For 2024, single filers with modified AGI above $161,000 cannot contribute directly to a Roth IRA (phase-out begins at $146,000). For married filing jointly, the phase-out is $230,000-$240,000.
Yes. You can withdraw your contributions (not earnings) from a Roth IRA at any time, tax and penalty-free. Earnings can be withdrawn penalty-free after age 59.5 if the account has been open at least 5 years.
High earners above the income limit can use the backdoor Roth strategy: make a non-deductible Traditional IRA contribution, then convert it to a Roth IRA. This is legal but may trigger the 'pro-rata rule' if you have other Traditional IRA balances.
No. Unlike Traditional IRAs and 401(k)s, Roth IRAs have no Required Minimum Distributions (RMDs) during the owner's lifetime. This makes the Roth IRA especially powerful for estate planning and leaving tax-free wealth to heirs.