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, 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. Beginning in 2009, the contribution limit
will adjust annually for inflation in $500 increments.
In 2008, 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.
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 |
2008
Income Phase-Out Range |
| Married
filing jointly or Head of household |
$159,000
to $169,000 |
| Single |
$101,000
to $116,000 |
| 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 2007,
the average compounded rate of return for the S&P 500, including
reinvestment of dividends, was approximately 11.4% per year
(source: www.standardandpoors.com). During this period,
the highest 12-month return was 61%, and the lowest was
-39%. Savings accounts at a bank can 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 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 2008, for single tax filers with an employer sponsored
retirement plan, an IRA contribution is fully tax-deductible
if your income is below $53,000. It is then prorated between
$53,000 and $63,000. If your income is over $63,000 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 $83,000 and $103,000.
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
$159,000 to $169,000. Second, if you are married filing
separately and have an employer sponsored retirement plan,
the income phase-out is from $0 to $10,000.
