Roth IRA Calculator: Estimate Tax-Free Savings And Income

Shawn Plummer

CEO, The Annuity Expert

Are you curious about how much money you need to save for retirement? Do you want to know how much income you can withdraw from your Roth each year? If so, you’re in luck! We have a free Roth IRA calculator to help you figure out all those things and more. This calculator is easy to use and will provide helpful information to help you plan for retirement.

Roth IRA Calculator: Calculate Your Growth

This calculator can be a useful tool for estimating your retirement savings. It can estimate your IRA balance at retirement age by inputting retirement savings, Roth IRA contributions, and the compounded rate of return. This can help plan for retirement and make sure you have enough saved. However, it is important to note that the calculator is mainly intended for use by U.S. residents.

Roth IRA Withdrawal Calculator: Calculate Your Income

As retirement age approaches, many people start to worry about how they will withdraw from their retirement savings plan. One option that can provide peace of mind is an annuity with a guaranteed lifetime withdrawal benefit (GLWB).

An annuity is an insurance policy that guarantees to distribute a paycheck to you for the rest of your life, even after the account runs out of money. This can provide much-needed security in retirement, knowing that you will have a regular income stream no matter what happens with your other retirement savings. In addition, an annuity can help to automate the retirement withdrawal process, making it one less thing you have to worry about.

So, if you are approaching retirement age and are wondering how to best withdraw from your retirement savings, an annuity with a GLWB may be worth considering.

Note: You can purchase an annuity (with no tax penalties) with your 401(k), IRAs, retirement accounts, investments, and cash.

Roth IRA Withdrawal Comparison

The table below compares withdrawals from Roth IRA accounts with other taxable savings accounts.

FeaturesAnnuity401(k)IRARoth IRA
Withdrawal Percentage5.20% – 6.55%4%4%4%
Can Income Increase?YesYesYesYes
Can Income Decrease?NoYesYesYes
How Long Will Money Last?Lifetime30 Years+30 Years+30 Years+
Annual Fees0 – 1.50%1% – 4%1% – 4%1% – 4%
TaxationTaxable/Tax-FreeTaxableTaxableTax-Free
Death BenefitAccount BalanceAccount BalanceAccount BalanceAccount Balance

Example: A 60-year-old retiree starts withdrawing immediately from their $1 million portfolio, they would receive:

Roth IRA Vs. Taxable Account

FeaturesRoth IRATraditional IRA401(k)Annuity
Taxable IncomeNoYesYesYes/No
Annual Contribution LimitsYesYesYesNo

Marginal tax rate

Typical taxable income taxes for taxable assets. Use this income tax rates schedule to help estimate your federal tax rate.

Filing Status And Federal Income Tax Rate Schedules

Tax RateSingle FilersMarried Filing Jointly
10%Up to $10,275Up to $20,550
12%$10,276 to $41,775$20,551 to $83,550
22%$41,776 to $89,075$83,551 to $178,150
24%$89,076 to $170,050$178,151 to $340,100
32%$170,051 to $215,950$340,101 to $431,900
35%$215,951 to $539,900$431,901 to $647,850
37%Over $539,900Over $647,850

Roth IRA Annual Contribution

  • Roth IRA Annual Contribution: The maximum annual IRA contribution is $6,000 in 2022 with no tax deduction
  • Additional Catch-up Contribution (age 50 or older): The contribution limit increases by $1,000 annually starting at age 50 and future contributions with no tax deduction.

The phase-out range for tax-deductible traditional IRA contributions

Tax Filing StatusIncome Phase-Out Ranges
Single/head of household$68,000 – $78,000
Married filing jointly$109,000 – $129,000
Married filing separately$0 – $10,000
Non-covered participant with a covered-participant spouse$204,000 – $214,000

Phase-out for Roth IRA contributions

A prorated Roth IRA contribution is allowed if income falls in the phase-out range. No contribution is allowed if the income exceeds the income phase-out range.

Filing StatusIncome Phase-Out Ranges
Single/head of household$129,000–$144,000
Married filing jointly$204,000–$214,000
Married filing separately$0–$10,000

Roth IRA Contributions

The maximum annual IRA contribution for a Roth IRA in 2022 is $6,000 (or $7,000 if you are 50 or older), and those who have not yet reached retirement age can make an additional catch-up contribution of $1,000 per year.

Many Roth IRA plans provide for the investment of money in various portfolios. These include mutual funds, index funds, and exchange-traded funds, all of which employ a range of stock and bond selections. There are several advantages and drawbacks to each.

  • The above options usually provide slow and steady growth of assets over time. Automated portfolios that adjust risk exposure to market volatility based on projected retirement age are also common.
  • If your retirement plan is set up a specific way, you can use your retirement funds to invest in individual stocks.
  • Investing involves risk, which means the Roth IRA can lose money.

Ultimately, it’s important to weigh all the options carefully before deciding what’s best for your individual circumstances, and remember investing involves risk.

Roth IRA Contribution Limit: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

Roth IRA 2022 Contribution Phaseout

There are income limits for contributing to a Roth IRA. If your income falls within the ‘phase-out’ range, you can contribute partially to your Roth IRA. You cannot make Roth contributions if your income exceeds the phase-out range, as seen in the table below. The 2022 Roth IRA contribution ‘phase-out’ ranges are summarized by income.

Tax Filing StatusIncome Phase-Out Range
Married filing jointly or head of household$204,000 to $214,000
Single$129,000 – $144,000
Married filing separately$0 – $10,000

Roth IRA Withdrawal Rules

The benefits of a Roth IRA are that your earnings can grow tax-free, and you can make qualified withdrawals without having to pay taxes. The rules for making withdrawals and being penalized vary depending on factors such as your age and how long you have had the account.

  • After age 59½, you can withdraw from your account without penalty.
  • Clients are only able to withdraw funds after a five-year holding period.
  • The early withdrawal penalty is waived for certain scenarios, like buying a house for the first time, college costs, or welcoming a new baby into the family.

To avoid a 10% early withdrawal penalty, follow these guidelines before making a Roth IRA withdrawal.

Roth IRA Early Withdrawal Exceptions

Medical expenses or insurance

You can withdraw money from your Roth IRA without being charged a penalty if you need to use it to pay for health insurance premiums while you’re unemployed. To be eligible, you must meet certain conditions:

  • You were let go from your job.
  • For 12 weeks in a row, you received unemployment compensation.
  • You may take the distributions either during the year when you received unemployment compensation or wait until the following year.
  • The distributions were provided to you no later than 60 days after returning to work.

A Roth IRA withdrawal penalty is also likely waived if unreimbursable medical expenses exceed 10% of your adjusted gross income for the year.

Series of substantially equal payments

If you have to pay a penalty for withdrawing money from your Roth IRA, you can avoid the penalty if you take a 72t early distribution. This means that you can take out money from your retirement account in annual payments based on your current age and the size of your retirement account.

The periodic payments must continue for five years or until age 59 ½, whichever occurs last. Your distribution will be calculated and exact, even if you don’t need the money.

Education

A Roth IRA distribution for expenses such as tuition, books, and supplies is allowed and still only subject to income tax–without an additional penalty.

Military

Some distributions are exempt from the early withdrawal penalty if you’re a qualified military reservist who’s been called to active duty.

Disability

If the Roth IRA owner becomes totally and permanently disabled, the 10% additional tax will be waived.

First-time home purchase

If you are looking to buy your first home, you and your spouse can withdraw $10,000 each from a Roth IRA without paying a penalty.

Roth IRA Vs. Taxable Account: Do I Pay Taxes On Withdrawals?

Although there isn’t a tax deduction on Roth contributions, Roth IRA plans offer several tax benefits that can help you to save for retirement. One of the primary tax benefits is that your balance can grow on a tax-free basis. This special tax treatment means you won’t pay taxes on your account balance when you withdraw income from the plan. However, eligible tax-free distributions can not withdraw from the account until age 59 1/2 without paying an early withdrawal penalty.

A traditional IRA and 401(k) are taxable investments, and all income withdrawn is taxed at a federal tax rate and possibly a state tax rate (if applicable).

Is A Roth IRA The Best Retirement Savings Plan?

Outside a Roth IRA annuity, Roth IRA savings accounts are one of the best (if not the best) retirement plans.

  • One of the biggest disadvantages is that your contributions are made with after-tax dollars, which means the Roth contributions are not tax-deductible contributions.
  • Another drawback is that Roth IRA contribution limits are very low, making saving as much as you might need difficult. Even the additional catch-up contribution limit doesn’t scratch the service.
  • Roth IRA accounts can lose money due to stock market volatility and potential high fees.
  • Finally, much guesswork is involved in planning for retirement with Roth savings accounts, as it’s difficult to know how much you’ll have accumulated by the time you retire.

Annuities can correct these shortcomings and help provide a secure retirement. Annuities also have the potential to offset with a premium bonus (up to 20%) and carry significantly lower risk. They can enhance tax-free withdrawals by guaranteeing a tax-free income for the rest of the participant’s lifetime.

Roth IRA Distributions

What happens when you’re ready to start taking distributions from your Roth IRA? Anyone older than 59 ½ can begin receiving distributions from their Roth IRAs, but they can also choose to defer receiving distributions to allow more earnings to accumulate. There are no Required Minimum Distributions (RMDs) in Roth IRAs. After 59 ½, participants have several options: they can take regular distributions, set up a systematic withdrawal plan, or leave their account untouched. Each option has its own pros and cons, so it’s important to understand all of your choices before making a decision.

Regular Distributions

When it comes to distributions from a Roth IRA plan, there are two main choices: a lump sum or installments.

  • With a lump-sum distribution, the entire amount is paid out at once. While this may be appealing for its simplicity, it has some downsides.
    • Although the Roth IRA savings are tax-free, the money is no longer invested and thus is not subject to tax-free compounding.
  • The installment option allows for periodic payments from the Roth plan. This type of distribution can be less appealing at first because it requires more planning and forethought. However, there are some advantages to consider as well.
    • For example, with an installment plan, the money continues to be invested and subject to tax-free compounding.
    • One of the hardest decisions when choosing an installment plan is how much to withdraw each month or year. There are numerous elements to consider, such as life expectancy, investment performance, how much a person may need to live comfortably, and Social Security payments.

Use An Annuity For Systematic Withdrawals For The Rest Of Your Life

One option is to roll over to a Roth IRA annuity. A Roth annuity is an insurance product that is offered through private insurance companies. No taxes will be imposed on conversions and is not a taxable savings account.

  • The annuity will pay a guaranteed monthly payment for the duration of the owner’s projected life expectancy.
  • If a joint-and-survivor annuity is purchased, the account owner and designated beneficiary will receive monthly payments for the rest of their expected lives. With substantially less chance of failure, this option can offer financial stability in retirement by providing a consistent flow of income with significantly less risk.

This option can provide a degree of financial security in retirement, as it can provide a steady stream of income that can last for many years with significantly lower risk.

Leave It Alone

With Roth accounts, there are no required minimum distributions. This can be a significant advantage, as it allows the funds to grow for longer. Furthermore, it can benefit those still working who want to delay taking distributions from their retirement accounts.

Next Steps

Use our free Roth calculator to estimate how much money you need to save for retirement. Leverage a compounded rate of return. With just a few clicks, you can see how much income you can withdraw from your IRA accounts each year and what steps you need to take to ensure a comfortable retirement. Don’t wait until it’s too late. Start planning for retirement today with our easy-to-use financial calculators. Contact us now for a quote on retirement planning services.

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Frequently Asked Questions

How much will a Roth IRA grow?

The expected rate of return depends on the performance of the Roth IRA’s investment funds and the compounded rate of return. From October 2, 2012, to October 12, 2022, the 10-year average annual compounded rate of return for the S&P 500 was approximately 9.61%.

How much should I be putting in a Roth IRA?

If you’re in a position to contribute the maximum annual Roth IRA contribution without sacrificing your other financial obligations or your quality of life, it’s definitely worth considering. When it comes to investing, putting money into a Roth before investing in other taxable accounts can be a smart move. That’s because retirees are can receive eligible tax-free distributions.

Does a Roth IRA grow without investing?

Roth IRAs grow through compounding, even during years when you can’t contribute. Roth IRA CDs and Roth IRA Fixed Annuities earn a fixed interest rate instead of investing in the market.

What age can you withdraw from Roth IRA?

You can withdraw from a Roth IRA accounts starting at age 59 1/2.

Is Roth better than 401k?

Generally speaking, a 401(k) plan is best for those who think they will be in a lower tax bracket when they retire. This is because contributions to a 401(k) are made with pre-tax dollars, which means you’ll pay less in taxes now. However, you will pay taxes on withdrawals from the account during retirement. On the other hand, Roth IRA contributions are made with after-tax dollars, so you won’t get any immediate tax benefits. But withdrawals during retirement are tax-free, which can be a big advantage if you think you’ll be in a higher tax bracket by then. Another consideration is investment options. 401(k) plans tend to have more limited investment choices than Roth IRAs. This can be an issue if you want more control over how your money is invested. Roth IRAs also tend to have lower fees than 401(k)s, which can make a big difference over time.

Why is my Roth IRA not making money?

Common reasons for losing money in a Roth IRA include choosing risky investments, failing to diversify your investment portfolio, and investing too much of the account’s funds in one stock or sector. Review all important aspects when it comes time to manage this type of retirement savings vehicle so you can avoid any future regrets!

What is better, a Roth IRA or CD?

A Roth IRA is a perfect solution for people who want to save and invest in their retirement without having a 401(k) from work. With a savings account that will grow over time, you can take advantage of higher rates while earning more interest than what CDs offer!

What is the downside of a Roth IRA?

There are some key disadvantages to a Roth IRA. One, you can’t take advantage of tax deductions when contributing; two, it takes five years before withdrawals from your account must be made if accessed early on in retirement (or anytime).

Does Roth IRA grow interest?

Yes. A Roth IRA can grow interest. The good news is that there are several options for doing just that. One option is to invest in a Roth IRA CD. This is essentially a certificate of deposit that’s held inside your Roth IRA. Another option is to invest in a Roth IRA fixed annuity. This is basically a fixed annuity that’s held inside your Roth IRA.

Which IRA has the highest interest rate?

A Roth Fixed Annuity offers the highest interest rate, from 3% to 5% annually, and can be purchased from a financial institution, insurance agency, or investment companies.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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