To secure a comfortable retirement, you should know how much money you need before you start saving.

If you’re thinking about opening a Roth individual retirement account (IRA), you can use a Roth IRA calculator to see how much you need to save to reach your retirement goals.

What is a Roth IRA?

Roth IRAs are tax-advantaged retirement savings accounts that get their name from former Delaware senator William Roth. Though they’re similar to traditional IRAs, they have a few differences, notably in how they’re taxed.

With a traditional IRA, you can deduct contributions from your income tax in the year you make them, and your withdrawals you make in retirement are taxed as regular income.

With a Roth IRA, your withdrawals in retirement are completely tax-free if you’ve had your account for at least five years and are 59 and one-half or older.

Why? You make contributions to a Roth IRA after you’ve already paid income tax, leaving your contributions to grow tax-free. Click here to learn more about Roth IRAs.

So why should you invest in a Roth IRA? Aside from the tax benefits mentioned above, you can contribute up to $6,000 per year to it as of 2019. (If you’re 50 or older, you can make an additional $1,000 catch-up contribution per year.) And you can contribute to a Roth IRA alongside a 401(k).

If you want to go back to college or have kids to send to college, you can make early contribution withdrawals without paying penalties to pay for qualified education expenses.

You may also contribute to a Roth IRA alongside a 529 college savings plan. Finally, you can open a Roth IRA as early as you want to, as long as you’ve earned an income.

The Roth IRA calculator

This easy-to-use tool can help you plan retirement savings with a Roth IRA. It’ll calculate how large your Roth IRA balance will be by a desired retirement age from the following data: A starting balance, an annual contribution, an expected rate of return, a marginal tax rate, and the amount of time between account opening and retirement.

Click here to use a Roth IRA calculator from Thrivent. If you’re wondering how to use a Roth IRA calculator, just remember that you need accurate data to put into the following required inputs:

  • your starting Roth IRA balance
  • your annual contribution
  • your age when you open the account
  • your age when you retire
  • your expected rate of return
  • your marginal tax rate

This calculator allows you to compare your Roth IRA savings against savings generated from a generic taxable savings account. It’ll also instantly put together a report for you to view or print for your reference.

The bottom line

Opening a Roth IRA is easy. You can open one through your bank or through a brokerage online or in person; and the earlier you open one, the more money you’ll have for your retirement. If you want to learn more about different retirement calculators, visit this comprehensive guide.

Your path to financial freedom starts here.

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