Roth IRA Dividend Calculator
Project how reinvested dividends snowball inside a Roth IRA, how much yearly income your portfolio could produce, and how much dividend tax you avoid along the way.
Dividend Portfolio
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How Dividend Reinvestment Is Modeled
Each year, the calculator pays a dividend equal to your current yield times your portfolio value. The full dividend is reinvested, and your new yearly contribution is added on top.
Your dividend growth rate raises the yield each year to reflect companies increasing their payouts. Share price changes are not modeled, so growth comes only from dividends and contributions.
Start with your portfolio
Enter the value of the dividend holdings in your Roth IRA and their current yield.
Add dividend growth
This is how fast payouts rise each year. The yield is capped at 25% to keep projections realistic.
Include new money
Annual contributions buy more shares, which then earn dividends of their own.
Compare the tax cost
Your taxable dividend rate shows what the same dividends would have cost in a brokerage account.
What Is the Formula?
The model repeats three steps every year: pay the dividend, reinvest it with new contributions, then raise the yield.
- V : Portfolio value
- Your Roth IRA dividend holdings, starting at the value you enter.
- y : Dividend yield
- Annual dividends as a percentage of portfolio value.
- g : Dividend growth
- The yearly rate at which payouts, and therefore yield, increase.
- C : New contributions
- Fresh money added at the end of each year.
- T : Taxable dividend rate
- The rate you would pay on these dividends in a taxable account.
Dividend Tax You Avoid Each Year
In a brokerage account, every dividend creates a tax bill even if you reinvest it. Here is what a year of dividends would cost at common rates, all of which drop to $0 in a Roth IRA.
| Annual dividends | 15% | 18.8% | 20% | 23.8% | 37% |
|---|---|---|---|---|---|
| $2,000 | $300 | $376 | $400 | $476 | $740 |
| $5,000 | $750 | $940 | $1,000 | $1,190 | $1,850 |
| $10,000 | $1,500 | $1,880 | $2,000 | $2,380 | $3,700 |
| $20,000 | $3,000 | $3,760 | $4,000 | $4,760 | $7,400 |
15% and 20% are qualified dividend rates; 18.8% and 23.8% add the 3.8% net investment income tax; 37% is the top ordinary rate for non qualified dividends.
Example: A $200,000 Dividend Portfolio Over 20 Years
This example uses the calculator’s default settings to show how quickly reinvested income compounds.
- 1Year one: $200,000 × 3% = $6,000 in dividends, which would have cost $900 in tax in a taxable account.
- 2Reinvest: $200,000 + $6,000 + $7,000 = $213,000. The yield rises to 3% × 1.07 = 3.21%.
- 3Year two: $213,000 × 3.21% = $6,837 in dividends, and the cycle continues.
FAQs
No, dividends inside a Roth IRA are not taxed when paid or reinvested, and qualified withdrawals are tax free too.
Reinvesting buys more shares that pay their own dividends, which is what drives the snowball shown in the calculator.
Not always, because foreign withholding tax may still be taken and cannot be claimed as a credit inside an IRA.
The tool raises the yield by your dividend growth rate each year to represent payout increases, capped at 25%.
No, the balance grows only through reinvested dividends and new contributions, which keeps the projection conservative.
Use 15% or 20% for qualified dividends, add 3.8% if the net investment income tax applies, or your ordinary rate for REIT payouts.
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