How to Calculate Roth IRA Growth: Formula & Example

What a Roth IRA is

A Roth IRA is a retirement account you fund with money you have already paid tax on. Contributions go in after tax, investments grow inside the account, and — if you follow the rules — withdrawals in retirement come out tax-free. Unlike a traditional IRA or a 401(k), where the tax break comes first and the tax bill comes later, the Roth IRA taxes you now and never again. The growth is just compound interest: your balance and your yearly contributions both earn a return, and each year’s earnings earn a return of their own. Every figure here is checked against the Roth IRA calculator.

The Roth IRA growth formula

One formula with two parts does the work. The future value of your starting balance is the balance times one plus the return, raised to the power of the number of years. The future value of your yearly contributions is the yearly amount times one plus the return raised to the power of the years, minus one, divided by the return. Remember it as: future value = balance × (1 + return)^years + yearly amount × ((1 + return)^years − 1) ÷ return. The ^ means “to the power of” — 1.07^25 is 1.07 times itself 25 times.

Step 1: Write down your starting balance

Start with the money already in the account — your starting balance. If you are opening a Roth IRA today, that number is $0. If you have been saving a while, use your latest statement balance. In this guide the starting balance is $10,000. Use the balance as it stands now, not what you contributed over the years — the growth is already in the balance, and counting it twice would overstate the result.

Step 2: Choose your yearly contribution (2026 limit $7,500)

Decide how much you will add each year. For 2026 the contribution limit is $7,500 a year if you are under 50, and $8,600 a year if you are 50 or older — the extra $1,100 is the catch-up contribution. The limit is per person across all your IRAs, not per account: a Roth IRA and a traditional IRA share the same $7,500. The limit is a ceiling, not a target: you can contribute less, but you cannot contribute more. Income matters too: for 2026, direct Roth IRA contributions phase out between $153,000 and $168,000 for single filers and between $242,000 and $252,000 for married couples filing jointly.

Step 3: Pick your years to retirement

Pick the number of years until you plan to retire. The guide uses 25 years: someone starting at 40 and retiring at 65. Years are the most powerful input, because compounding needs time: ten extra years at 7% more than doubles the growth on a starting balance.

Step 4: Choose an annual return (7% long-run stock average)

This guide uses 7% a year, the long-run average return of the US stock market after inflation (roughly 10% before inflation). But 7% is an average, not a promise: in any single year the market can rise or fall 20%, and your balance will jump around the smooth line in this calculation. Using 7% keeps the example honest.

Step 5: Grow the starting balance: balance × (1 + return)^years

Multiply the starting balance by one plus the return, raised to the power of the years: $10,000 × 1.07^25. 1.07^25 is about 5.4274, so $10,000 becomes $54,274.33. The original $10,000 more than quintuples without a single extra dollar added.

Step 6: Grow the contributions: yearly amount × ((1 + return)^years − 1) ÷ return, then add

The formula is the yearly amount times ((1 + return)^years − 1) divided by the return: $7,500 × (1.07^25 − 1) ÷ 0.07, a factor of about 63.2490, so $7,500 a year becomes $474,367.77. Add the two parts: $54,274.33 plus $474,367.77 is $528,642.11. That is the future value after 25 years.

Worked example: $10,000 at 7% for 25 years

Put the six steps together: $10,000, $7,500 a year, 25 years, 7% — the starting balance grows to $54,274.33 and the contributions to $474,367.77, for a future value of $528,642.11. Your total contributions are $10,000 plus 25 years of $7,500: $197,500. The growth is $528,642.11 minus $197,500: $331,142.11. The $7,500 a year works out to $625.00 a month. Note that totals are computed from unrounded values, so rounded parts may differ by a cent from their rounded sum.

Working backwards: what yearly amount reaches your goal?

The calculation also runs in reverse. To reach $1,000,000 in 25 years from a $10,000 start at 7%, you would need $14,952.41 a year — which gives $999,999.87. That is almost double the $7,500 yearly limit, so a Roth IRA alone cannot reach $1,000,000 on this path. A smaller goal is reachable: $3,094.52 a year reaches $250,000 in 25 years (it gives $249,999.74), about $257.88 a month. At 50 or older, the $8,600 limit changes the picture: $8,600 a year for 25 years at 7% grows to $598,216.05.

What the calculation leaves out

The calculation leaves out five things. First, taxes on the way in: Roth IRA money is after-tax money. Second, the income limits: above the phase-out range, you cannot contribute directly to a Roth IRA at all. Third, the 5-year rule and the age 59½ rule: earnings are tax-free only if the account has been open at least five years and you are 59½ or older. Fourth, there are no RMDs for the owner: unlike a traditional IRA or a 401(k), you are never forced to withdraw. Fifth, a steady 7% is an average, not a year-by-year promise: real returns bounce around.

What to do next

Run your own numbers through the Roth IRA calculator: try your balance, your contribution, and your years, then work backwards to see what yearly amount your goal needs. Then check the workplace-plan side with the 401(k) contribution calculator — for most people the Roth IRA and the 401(k) work together, not instead of each other.