How a Roth IRA works
You put in money you've already paid tax on. It's invested and grows, and once you're 59½ and the account has been open five years, everything you take out, growth included, is tax-free. That's the big difference from a traditional IRA or 401(k), where withdrawals are taxed.
Balance at retirement = today's balance and yearly contributions, grown at your return until you retire
2026 contribution limits
You can put in up to $7,500 in 2026, or $8,600 if you're 50 or older, but no more than you earned. Above certain incomes the limit shrinks, then disappears:
| Filing status | Full contribution below | None above |
|---|---|---|
| Single or head of household | $153,000 | $168,000 |
| Married filing jointly | $242,000 | $252,000 |
In between, the limit is reduced in proportion. For example, a single filer with a modified AGI of $160,000 can put in $4,000. The calculator applies the IRS worksheet for you.
Worked example
Start at 30 with nothing saved and put in $7,500 a year. At a 7% return, by 65 you'd have $1,069,634, from $262,500 of contributions. The other $807,134 is growth you'll never pay tax on.
In a regular brokerage account, the same growth taxed at 15% would cost about $121,070. Start at 40 instead and you'd reach $489,401: the first ten years of compounding matter most.
Questions people ask
Roth IRA or traditional IRA?
A Roth makes sense when you expect your tax rate in retirement to be the same or higher than now, for example early in your career. A traditional IRA may deduct your contribution today, and you pay tax on withdrawals later.
Can I take my money out early?
Your contributions can come out at any time without tax or penalty. Earnings taken out before 59½, or before the account is five years old, can be taxed and penalized unless an exception applies.
Can I have a Roth IRA and a 401(k)?
Yes. The limits are separate. Many people take their full 401(k) match first, then fund a Roth IRA. See the 401(k) calculator.
Sources
- IRS: 2026 IRA limit ($7,500) and Roth IRA income phase-out ranges
- IRS Publication 590-A: Worksheet 2-2, reduced Roth IRA contribution limit
- IRS: Roth IRAs
Reviewed September 26, 2026 by The Dollars World team. How we build and check our calculators · Our data and formulas. This is general information, not financial advice.