- 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 2006,
the maximum annual IRA contribution is $4,000 per individual. It is
important to note that this is the maximum total contributed to all
of your IRA accounts. This maximum will increase to $5,000 by 2008.
The table below summarizes IRA annual contribution limits.
| Year |
IRA
contribution limit |
| 2005-2007 |
$4,000 |
| 2008
and after* |
$5,000 |
*Beginning
in 2009, the contribution limit will adjust annually for inflation
in $500 increments
In 2006, if
you are 50 or older, you can make an additional "catch-up" contribution
of $1000. This is an increase of $500 over the 2005 "catch-up" contribution.
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. For the
purposes of this calculator, we assume that your income does not
limit your ability to contribute to a Roth IRA. The table below
summarizes the income "phase-out" ranges for Roth IRAs.
| Tax
filing status |
Income
Phase-Out Range |
| Married
filing jointly or Head of household |
$150,000
to $160,000 |
| Single |
$95,000 to $110,000 |
| Married
filing separately |
$0
to $10,000 |
- 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 dependant on the
type of investments you select. From January 1970 to December 2005,
the average compounded rate of return for the S&P 500, including reinvestment
of dividends, was approximately 11.4% per year. During this period,
the highest 12-month return was 61%, and the lowest was -39%. Savings
accounts at a bank pay as little as 1% or less. It is important to
remember that future rates of return can't be predicted with certainty
and that investments that pay higher rates of return are 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.
- 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 2006, for
single tax filers with an employer sponsored retirement plan, an
IRA contribution is fully tax-deductible if your income is below
$50,000. It is then prorated between $50,000 and $60,000. If your
income is over $60,000 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 75,000 and $85,000. The phase-out ranges are scheduled to
increase over the next few years. The table below summarizes the
deduction phase-out for 2006 - 2007.
Traditional IRA Deduction Income Phase-Out Ranges |
| Year |
Single
Taxpayers |
Married
Taxpayers Filing Jointly |
| 2006 |
$50,000-$60,000 |
$75,000-$85,000 |
| 2007 |
$50,000-$60,000 |
$80,000-$100,000 |
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 $150,000 to $160,000.
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.
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