Roth IRA vs Taxable Account Calculator - Compare Investment Strategies

Investment Growth Analysis

Annual Projection Schedule

How to Use This Calculator

Input Parameters:

• Current Balance: Your existing investment amount
• Expected Annual Return: Historical stock market average is ~10% (adjust for your risk tolerance)
• Current Age & Retirement Age: Determines investment timeline
• Tax Rate: Your current marginal tax rate
• Annual Contributions: How much you plan to invest yearly

Understanding Results:

• Charts: Visual comparison of growth patterns over time
• Breakdown Table: Detailed comparison of final outcomes
• Annual Schedule: Year-by-year progression details
• Tax Impact: Shows how taxes affect taxable accounts

What Is the Growth Formula for a Roth IRA?

Annual Balance = (Previous Balance × (1 + Return Rate)) + Annual Contribution

Since Roth IRA contributions are made with after-tax dollars, all growth and withdrawals in retirement are tax-free.

What Is the Growth Formula for a Taxable Account?

Annual Balance = (Previous Balance × (1 + Return Rate)) - (Interest × Tax Rate) + Annual Contribution

Taxable accounts are subject to annual taxes on interest, dividends, and capital gains distributions.

What Are the Key Differences Between a Roth Ira and Taxable Accounts?

Roth IRA Advantages

• Tax-free growth and qualified withdrawals in retirement
• No required minimum distributions (RMDs) during your lifetime
• Contributions can be withdrawn penalty-free at any time
• Estate planning benefits for heirs

Taxable Account Advantages

• No contribution limits or income restrictions
• Complete liquidity - access funds anytime without penalties
• Potential for preferential capital gains tax rates
• No age restrictions for contributions or withdrawals

What Are the 2025 Roth Ira Contribution Limits?

• Under age 50: $7,000 annually
• Age 50 and older: $8,000 annually (includes $1,000 catch-up contribution)
• Income limits apply for direct contributions

Should I Invest in a Roth IRA or Taxable Account?

• High current tax bracket → Consider traditional IRA/401(k)
• Low current tax bracket → Roth IRA often advantageous
• Expected higher future tax bracket → Roth IRA preferred

References and Additional Resources

Government Resources:

• IRS - Roth IRA Information
• IRS - IRA Contribution Limits
• SEC - IRA Investment Guidelines
• Consumer.gov - Saving and Investing

Educational Resources:

• Investor.gov - Investing Basics
• Treasury.gov - Tax Information
• CFPB - Retirement Planning