Roth IRA Growth Calculator

Compound Interest Formula:

\[ FV = PV \times (1 + \frac{r}{n})^{n \times t} \]

Initial Investment (PV):

Annual Interest Rate (r):

decimal

Compounding Periods per Year (n):

times/year

Time Period (t):

years

Future Value (FV):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Roth IRA Growth Calculator?

The Roth IRA Growth Calculator estimates the future value of your Roth IRA investment using compound interest. It helps you project how your retirement savings may grow over time based on your contributions and expected returns.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ FV = PV \times (1 + \frac{r}{n})^{n \times t} \]

Where:

\( FV \) — Future Value of investment
\( PV \) — Present Value or initial investment
\( r \) — Annual interest rate (in decimal form)
\( n \) — Number of compounding periods per year
\( t \) — Time the money is invested for (in years)

Explanation: The formula accounts for compound growth, where interest is earned on both the initial principal and accumulated interest.

3. Importance of Compound Interest

Details: Compound interest is powerful for retirement planning because earnings generate their own earnings over time. The more frequently your investment compounds, the faster it grows.

4. Using the Calculator

Tips: Enter your initial investment amount, expected annual return rate (as decimal), how often interest compounds per year, and number of years you plan to invest. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.

Q2: How often does a Roth IRA typically compound?
A: Most Roth IRAs compound either daily or monthly, depending on the financial institution.

Q3: What's a realistic rate of return for a Roth IRA?
A: Historically, stock market returns average about 7-10% annually, but your actual rate will vary based on your investments.

Q4: Does this calculator account for additional contributions?
A: No, this calculates growth on a single initial investment. For recurring contributions, you would need a more complex calculator.

Q5: Are Roth IRA earnings really tax-free?
A: Yes, qualified withdrawals (after age 59½ and held for 5+ years) are completely tax-free, including all earnings.