Roth IRA Calculator

Roth wins when your tax rate in retirement is higher than or equal to your current rate. It also wins if you expect tax rates to rise, plan to leave assets to heirs (no RMDs), or want flexibility (access to contributions penalty-free). Traditional wins if you're in a high bracket now and expect lower income in retirement. The closer your rates are, the more Roth's flexibility tilts the decision.

If your income exceeds Roth IRA limits, you can contribute to a Traditional IRA (non-deductible) then immediately convert to Roth — a "backdoor Roth." No income limits apply to conversions. Watch the pro-rata rule: if you have other pre-tax IRA balances, part of your conversion will be taxable. The mega backdoor Roth uses after-tax 401(k) contributions converted to Roth, allowing up to ~$43,500 extra annually (2025).

Contributions (not earnings) can be withdrawn any time, tax and penalty-free — you already paid tax on them. Earnings withdrawn before age 59½ and before the account is 5 years old are subject to income tax + 10% penalty. Exceptions: first home purchase ($10K lifetime), disability, higher education, substantially equal periodic payments (SEPP).

No — the Roth IRA is a US-specific account. The Canadian equivalent is the Tax-Free Savings Account (TFSA), which also grows tax-free and allows tax-free withdrawals. Key difference: TFSA has no income restrictions and withdrawn room is restored the following year. RRSP is the Canadian equivalent of a Traditional IRA (pre-tax contributions, taxed on withdrawal).

There are actually two 5-year rules: (1) To withdraw earnings tax-free, your first Roth contribution must have been made at least 5 years ago AND you must be 59½+. (2) Each Roth conversion has its own 5-year holding period for the converted amount to avoid the 10% penalty (if under 59½). The clock starts January 1 of the tax year the contribution or conversion was made.