Which
is better: a Roth IRA or a Traditional IRA?
An
IRA can be an effective retirement tool. There are two basic
types of Individual retirement accounts (IRA), the Roth IRA
and the Traditional IRA. Use this calculator to determine
which IRA is right for you.
Definitions
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Current
age:
 |
Your
current age
|
Annual
contribution:
|
The
amount you will contribute to your a IRA each year. The maximum
contribution is $2000 per year. Traditional IRA contributions
can be tax deductible, but require you to pay taxes on all
interest earned when you make withdrawals. A Roth IRA contribution
is not tax deductible, but all contributions and earnings
are tax free when you make withdrawals.
|
Expected
rate of return:
|
The
annual percent you expect to earn on your investment.
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Age
of retirement:
|
Age
you desire to retire.
|
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.
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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.
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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 401k or pension. This is used to determine if you
can deduct your annual contributions from your taxes.
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Total
non-deductible contributions:
|
For
a Traditional IRA, this is the total amount of your contributions
that were deposited without a current year tax deduction.
(Roth IRA contributions are always non-deductible)
|
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 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 a ordinary taxable account)
any income tax savings.
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