Roth IRA Calculator - NerdWallet (2024)

FAQs

At what income level does Roth IRA not make sense? ›

For tax year 2024, single and head-of-household filers with MAGIs of $146,000 to $161,000 can contribute only limited amounts. The income phaseout range for married couples filing jointly is $230,000 to $240,000. Taxpayers with incomes above those top numbers cannot contribute anything to a Roth IRA.

The Roth IRA annual contribution limit is $7,000 in 2024 ($8,000 if age 50 or older). If you open a Roth IRA and fund it with $7,000 each year for 10 years, and your investments earn 6% annually, you may end up with more than $92,000 by the end of the decade.

Becoming a Roth IRA millionaire is not only possible, it's actually quite easy! Just set up a free online account with a big broker, fund it annually with maximum contributions, and invest in low cost index funds. Boom – you'll reach millionaire status in your Roth IRA account over the course of a few decades.

You're never too old to fund a Roth IRA. The earlier you start a Roth IRA, the longer you have to save and take advantage of compound interest. Even when you're close to retirement or already in retirement, opening this special retirement savings vehicle can still make sense under some circ*mstances.

The IRS puts annual income limits on a Roth IRA. When you exceed that limit, the IRS generally charges a 6% tax penalty for each year the excess contributions remain in your account. This is triggered at the time you file each year's taxes, giving you until that deadline to remove or recharacterize the misplaced funds.

If your age is between 40 and 50, it is not obvious whether conversion makes sense. If your age is greater than 50, it likely doesn't make sense to convert because there is not enough time to allow the Roth IRA growth to exceed the tax cost today.

Therefore, maxing out your Roth IRA can benefit you, even with a lower income. Because contributions are made with after-tax dollars, qualified withdrawals in retirement are tax-free, and can thereby help you reduce your long-term tax burden.

This rule for Roth IRA distributions stipulates that five years must pass after the tax year of your first Roth IRA contribution before you can withdraw the earnings from the account tax-free. Keep in mind that the five-year clock begins ticking on Jan. 1 of the year you made your first contribution to the account.

Rely on the math

Still, the math behind becoming a Roth IRA millionaire still holds. Assuming an annual January contribution to your Roth IRA of $6,500 and an 8% average long-term investment return, you can expect to become an IRA millionaire in just under 34 years.

There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more.

Can I retire at 62 with 1 million? ›

In fact, with careful planning and a solid investment strategy, you could possibly live off the returns from a $1 million nest egg. When figuring out how much you'll need for retirement, be sure to factor in cost of living and inflation, withdrawal taxes, health care expenses, and lifestyle preferences.

In fact, Fidelity noted that as of the end of 2023, a record number of people -- 391,562 -- had balances of a million or more in their IRAs.

One disadvantage of the Roth IRA is that you can't contribute to one if you make too much money. The limits are based on your modified adjusted gross income (MAGI) and tax filing status.

Unlike the traditional IRA, where contributions aren't allowed after age 70½, you're never too old to open a Roth IRA.

Backdoor Roth IRA: A backdoor Roth IRA is a strategy for high-income earners who exceed Roth IRA contribution income limits. It involves making non-deductible contributions to a traditional IRA and then converting those funds into a Roth IRA. This allows high allows high earners to take advantage of Roth IRA benefits.

No income limitation to participate. Aggregate* employee elective contributions limited to $23,000 in 2024; $22,500 in 2023; $20,500 in 2022; $19,500 in 2021 (plus an additional $6,500 in 2022 and 2021 for employees age 50 or over; additional $7,500 in 2023 and 2024 for employees age 50 or over).

If you earn more than the maximum amount, you cannot contribute to a Roth IRA. For 2024, you can't contribute to a Roth if you earn $161,000 or more per year—or $240,000 or more if you are married and file a joint return.