Unlike traditional individual retirement accounts, Roth IRAs do not accept tax-deductible contributions. But withdrawals from a Roth IRA are tax-deductible, making a Roth a good investment if you expect a higher tax liability in the future. Roth IRAs also let you make penalty-free withdrawals of contributions at any time, unlike traditional IRAs. The amount of money in your Roth IRA depends on how much you've contributed and how long until you withdraw from it.
Enter your annual contribution to a Roth IRA into a physical or online financial calculator (see Resources section), and then press the "PMT" button. For example, if you contribute $3,000 every year, type "3000."Step 2
Enter the number of years for which you will make contributions, and then press the "n" button. For example, if you will contribute annually for 20 years, type "20."Step 3
Press "0" to represent the account's initial balance, and then press the "PV" key.Step 4
Enter the Roth IRA's annual growth rate, and then press the "i" key. For example, if you anticipate an annual growth of 6 percent, type "6."Step 5
Press the calculator's "FV" button and then press "Compute" to calculate the funds in the Roth IRA. With this example, the Roth IRA is worth $110,357 after 20 years of $3,000 annual contributions growing at 6 percent a year.
Items you will need
- Financial calculator
- Comstock/Comstock/Getty Images