Tax now, not later
A Roth IRA is a retirement account you fund with money you've already paid income tax on. In exchange, qualified withdrawals, including all the growth, come out tax-free. A traditional account flips that: a tax break going in, tax on the way out.
The 2026 numbers
The IRS limit for IRA contributions in 2026 is $7,500, or $8,600 if you're 50 or older (a $1,100 catch-up). You need earned income at least equal to what you contribute. The ability to contribute directly phases out at higher incomes: $153,000 to $168,000 of modified AGI for single filers and $242,000 to $252,000 for married couples filing jointly. The video's $625 a month is exactly $7,500 a year.
How big the growth share gets
$625 a month from age 25 to 65 at a hypothetical 7% (compounded monthly) grows to about $1,640,508. You'd have put in $300,000; the other $1.34 million, about 82%, is growth. That growth share is what makes the "tax-free" part matter: in a Roth, the big number is the part that isn't taxed later, if the rules are met. Try "stop after 10 years": contributions end at 35, and the balance still reaches about $878,000 because the early money keeps compounding.
Withdrawal rules
Your contributions (not the growth) can come out at any time without tax or penalty. Growth comes out tax-free in a qualified distribution: generally age 59½ and at least five years since your first Roth IRA contribution. Exceptions exist for disability, death, and up to $10,000 for a first home. Outside those, growth withdrawals can be taxed and hit with a 10% additional tax. IRS Publications 590-A and 590-B have the details.
Roth IRA and a 401(k) together
An IRA and a workplace 401(k) have separate limits, so they can be used together: in 2026 that's $7,500 plus $24,500, or $32,000 of combined room under age 50. That's room, not a target. The table on this page compares the two account types side by side.
What the calculator assumes
A steady hypothetical rate, monthly deposits at month-end, no fees, and nominal dollars (not adjusted for inflation). Tax rules change; check irs.gov for your own situation.
Sources
- IRS: 2026 401(k) and IRA limits (IR-2025-111)
- IRS Publication 590-A (IRA contributions)
- IRS Publication 590-B (IRA distributions)
- IRS Topic 558: additional tax on early distributions
Last reviewed: Sep 28, 2026