IRA Calculator

- April 25, 2025
| |

Calculate your potential IRA (Individual Retirement Account) savings over time. Compare Traditional and Roth IRA options to help make informed retirement planning decisions based on your age, contributions, and expected returns.

Personal Information

Financial Details

$
$
$
%
%
%
%

Display Options

Traditional vs. Roth IRA: Understanding the Differences

Individual Retirement Accounts (IRAs) are tax-advantaged investment accounts designed to help you save for retirement. The two main types are Traditional IRAs and Roth IRAs, each with distinct tax advantages.

Traditional IRA
  • Tax Treatment: Contributions may be tax-deductible in the year they are made, reducing your current taxable income.
  • Growth: Investments grow tax-deferred, meaning you don't pay taxes on capital gains or dividends while the money remains in the account.
  • Withdrawals: Distributions in retirement are taxed as ordinary income.
  • Required Minimum Distributions (RMDs): You must start taking distributions at age 72 (73 for those born after 1960).
  • Income Limits: No income limits for contributions, but deductibility may be limited if you have access to an employer retirement plan.
Roth IRA
  • Tax Treatment: Contributions are made with after-tax dollars (no immediate tax deduction).
  • Growth: Investments grow tax-free.
  • Withdrawals: Qualified distributions in retirement are completely tax-free.
  • Required Minimum Distributions: No RMDs during the original owner's lifetime.
  • Income Limits: There are income limits that may restrict your ability to contribute directly to a Roth IRA.
Which IRA Is Right for You?

Choosing between a Traditional and Roth IRA often depends on your current tax situation versus your expected tax situation in retirement:

  • Choose Traditional: If you expect to be in a lower tax bracket in retirement than you are now.
  • Choose Roth: If you expect to be in a higher tax bracket in retirement or want tax-free withdrawals.

Many investors choose to have both types of accounts to provide tax diversification in retirement.

Contribution Limits (2025)

The IRA contribution limit is $7,000 per year ($8,000 if you're age 50 or older). This limit applies to the total of your Traditional and Roth IRA contributions combined.

This calculator provides estimates based on the information you provide and various assumptions. It's intended for illustrative purposes only and does not guarantee actual results. Future market performance, tax laws, and inflation rates can't be predicted with certainty. Consult with a financial advisor for personalized advice.

Understanding the IRA Calculator

The IRA Calculator helps you figure out how much you can save in your Individual Retirement Account (IRA) over time. It’s designed to compare Traditional and Roth IRA options. By entering your age, contributions, and expected returns, you can make better choices for your retirement plans.

Input Your Personal Information

To use the calculator effectively, you’ll need to provide some personal details. You’ll enter your current age, desired retirement age, and annual income. These factors play a big role in predicting your potential savings and help ensure the results are tailored to your situation.

Financial Details That Matter

Your financial information is crucial for accurate calculations. The calculator asks for your current IRA balance, annual contributions, expected annual return rate, and tax rates. These inputs allow for a clear picture of how your retirement savings can grow. Here’s what you need:

  • Current IRA balance
  • Annual contributions
  • Expected annual return percentage
  • Current and expected tax rates

Comparing Traditional and Roth IRAs

One of the best features of the IRA Calculator is its ability to compare Traditional and Roth IRAs. Each type has its benefits. For instance, Traditional IRAs may offer tax deductions on contributions, while Roth IRAs allow for tax-free withdrawals in retirement. This comparison helps you see how each option could perform based on your specific situation.

Inflation and Its Impact

Inflation can erode your savings over time, which is why the calculator also lets you factor in expected inflation rates. By understanding how inflation affects the real value of your savings, you can make more informed decisions about your retirement strategy. You can choose to see results with inflation adjustments included.

Visualize Your Retirement Growth

The IRA Calculator provides a visual display of your potential growth through charts. This feature helps you understand how your savings will evolve over the years, making it easier to see the long-term benefits of your contributions. The graph will show how different rates of return impact both IRA types.

Yearly Breakdown of Your Savings

If you want to dive deeper, the calculator offers a detailed yearly breakdown of your savings. You’ll be able to see how much you contribute each year and the projected balance of both Traditional and Roth IRAs. This information is essential for planning your contributions and understanding your growth over time.

Final Thoughts on retirement planning

Using the IRA Calculator can significantly enhance your retirement planning. It allows you to input your unique situation and provides insights that can guide your decision-making. Whether you’re just starting to save or looking to optimise your existing accounts, this tool is a helpful resource for your financial future.