- Current age
- Your current age.
- Annual contribution
- The amount you will contribute to an IRA each year. This
calculator assumes that you make your contribution at the beginning
of each year. In 2008 and 2009, the maximum annual IRA contribution
is $5,000 per individual. It is important to note that this is the
maximum total contributed to all of your IRA accounts. The
contribution limit, beginning in 2009, increases with inflation in
$500 increments. An annual change to the contribution limit only
occurs if the cumulative effect of inflation since the last
adjustment is $500 or more.
In 2008 and 2009, if you are age 50 or older, you can make an
additional "catch-up" contribution of $1000. In order to qualify
for the "catch-up" contribution, you must turn 50 by the end of the
year in which you are making the contribution.
You can no longer make contributions to a traditional IRA in the
year you reach 70 1/2.
It is important to note that Roth IRA contributions are limited
for higher incomes. If your income falls in a "phase-out" range you
are allowed only a prorated Roth IRA contribution. If your income
exceeds the phase-out range, you do not qualify for any Roth IRA
contribution. The table below summarizes the income "phase-out"
ranges for Roth IRAs.
| Married filing jointly
or Head of household |
$166,000 to
$176,000 |
| Single |
$105,000 to
$120,000 |
| Married filing
separately* |
$0 to $10,000 |
*For the purposes of this calculator, we assume are not Married
filing separately and contributing to a Roth IRA.
- Expected rate of return
- The annual rate of return for your IRA. This calculator assumes
that your return is compounded annually and your contributions are
made at the beginning of each year. The actual rate of return is
largely dependent on the type of investments you select. From
January 1970 to December 2008, the average annual compounded rate
of return for the S&P 500, including reinvestment of dividends,
was approximately 9.7% (source: www.standardandpoors.com). During
this period, the highest 12-month return was 61%, from June 1982
through June 1983. The lowest 12-month return was -39%, which
happened twice, once from September 1973 to September 1974 and
again from November 2007 to November 2008. Savings accounts at a
bank may pay as little as 1% or less but carry significantly lower
risk of loss of principal balances.
It is important to remember that these scenarios are
hypothetical and that future rates of return can't be predicted
with certainty and that investments that pay higher rates of return
are generally subject to higher risk and volatility. The actual
rate of return on investments can vary widely over time, especially
for long-term investments. This includes the potential loss of
principal on your investment. It is not possible to invest directly
in an index and the compounded rate of return noted above does not
reflect sales charges and other fees that funds and/or investment
companies may charge.
- Age of retirement
- Age you wish to retire. This calculator assumes that the year
you retire, you do not make any contributions to your IRA. So if
you retire at age 65, your last contribution happened when you were
actually 64.
- Current tax rate
- The current marginal income tax rate you expect to pay on your
taxable investments.
- Retirement tax rate
- The marginal tax rate you expect to pay on your investments at
retirement.
- Adjusted gross income
- Your adjusted gross income from your taxes. This is used to
calculate whether you are able to deduct your annual contributions
from your income tax statement.
- Are you married?
- Check the box if you are married. This is used to determine
whether you can deduct your annual contributions from your
taxes.
- Employer plan?
- Check the box if you have an employer sponsored retirement
plan, such as a 401(k) or pension. This is used to determine if you
can deduct your annual contributions from your taxes.
- Total non-deductible contributions
- The total of your Traditional IRA contributions that were
deposited without a tax deduction. Traditional IRA contributions
are normally tax-deductible. However, if you have an employer
sponsored retirement plan, such as a 401(k), your tax deduction may
be limited.
In 2009, for single tax filers with an employer sponsored
retirement plan, an IRA contribution is fully tax-deductible if
your income is below $55,000. It is then prorated between $55,000
and $65,000. If your income is over $65,000 and you have an
employer sponsored retirement plan, such as a 401(k), you receive
no tax deduction. For married couples, the same rules apply except
the deduction is phased out between $89,000 and $109,000.
This calculator automatically determines if your tax deduction
is limited by your income. However, there are two unusual
situations not automatically accounted for where additional tax
phase-outs are applied. First, if your spouse has an employer
sponsored retirement plan but you do not, your tax deduction is
phased out from $166,000 to $176,000. Second, if you are married
filing separately and have an employer sponsored retirement plan,
the income phase-out is from $0 to $10,000.
- Total contributions
- The total amount contributed to your IRA.
- IRA total after taxes
- For the Roth IRA, this is the total value of the account. For
the Traditional IRA, this is the sum of two parts: 1) The value of
the account after you pay income taxes on all earnings and
tax-deductible contributions and 2) what you would have earned if
you had invested (in an ordinary taxable account) any income tax
savings.
Please note, for distributions to include earnings that are tax
free the Roth IRA must be opened for 5 tax years. Eligible tax free
distributions include those taken for death or disability, after
age 59 1/2, or for a first time home purchase.
|
