Roth IRA Calculator
Enter the initial balance, monthly after-tax contribution, expected annual return, and contribution years to estimate the Roth IRA's compound value at retirement and the tax-free investment gains.
Input Data
Results
At a glance:A Roth IRA grows tax-free; contributions use after-tax money, so the future value's gains are never taxed on qualified withdrawal.
Formula
futureValue = initialBalance·(1+r)^n + monthlyContribution·((1+r)^n − 1)/r (r = annualReturn%/12, n = years×12)
totalContributed = initialBalance + monthlyContribution×years×12
totalInterest = futureValue − totalContributed
$$FV = P(1+i)^n + PMT\cdot\dfrac{(1+i)^n-1}{i}$$$$i = \dfrac{r}{12},\quad n = \text{years}\times 12$$$$\text{Tax-free Gain} = FV - \left(P + PMT\times n\right)$$How to Use
- Enter the initial balance and monthly contribution.
- Enter the annual return and years to retirement.
- Review the value, contributed principal, and tax-free gains.
FAQ
How does a Roth IRA differ in tax treatment from a traditional IRA / 401(k)?
Traditional IRA / 401(k) uses pre-tax contributions and taxes withdrawals in retirement. A Roth IRA uses after-tax contributions, so both the principal and the gains come out tax-free in retirement. If you expect your retirement tax rate to be no lower, paying tax upfront to lock in tax-free growth is usually more favourable.
Hong Kong has no Roth IRA — is this calculator useful to me?
Yes. It demonstrates the effect of after-tax contributions plus tax-free compounding. Hong Kong's MPF and Qualifying Deferred Annuity Premiums (QDAP) are also tax-free on withdrawal, similar in spirit. Enter your own monthly retirement contribution to estimate the long-term balance you can draw tax-free.
Why does the calculator highlight 'tax-free investment gains'?
Because the Roth's biggest selling point is tax-free gains. The data table shows that the longer the contribution period, the larger the share of tax-free gains — at 40 years the gains are nearly 5 times the after-tax principal. Highlighting this shows how much tax a long holding can avoid.
Does the result account for inflation and fees?
No. The output is nominal, not net of inflation or fund fees. For real purchasing power, reduce the annual return by about 2%–3% for inflation; investment management fees can also be deducted from the return before estimating.
Is a high return assumption wise near retirement?
No. Higher expected returns usually mean higher volatility; a market crash near retirement leaves little time to recover. A common approach is more equities when young for growth, then gradually shifting to conservative assets near retirement. Lower the return to model a conservative allocation.
This calculator's content is reviewed by our Licensed Financial Planning team. Results are for reference only; please refer to the relevant authorities for the official figures.