





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 may be right for you.
Definitions
 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. From 2008 through 2012, 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 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.
If you are 50 or older you can make an additional "catchup" contribution of $1,000. The "catchup" contribution amount of $1,000 remains unchanged for 2012. In order to qualify for the "catchup" 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 "phaseout" range you are allowed only a prorated Roth IRA contribution. If your income exceeds the phaseout range, you do not qualify for any Roth IRA contribution. The table below summarizes the income "phaseout" ranges for Roth IRAs.
Starting in 2010 high income individuals will have the option to make nondeductible Traditional IRA contributions and then immediately convert them to a Roth IRA. This can effectively eliminate the income phaseout for Roth IRA contributions. This loophole for Roth IRA contributions may or may not be available in later years depending on future changes to the IRA law. This calculator assumes that you will not be taking advantage of this option.
Married filing jointly or head of household  $173,000 to $183,000 
Single 
$110,000 to $125,000 
Married filing separately*  $0 to $10,000 
*For the purposes of this calculator, we assume you are not Married filing separately.
 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. The actual rate of return is largely dependent on the type of investments you select. The S&P 500 for the ten years ending on December 31st, 2011 had an annual compounded rate of return of 2.92%, including reinvestment of dividends. From January 1970 through the end of 2011, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.01% (source: www.standardandpoors.com). Since 1970, the highest 12month return was 61% (June 1982 through June 1983). The lowest 12month return was 43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 0.25% 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 longterm 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 nondeductible contributions
 The total of your Traditional IRA contributions that were deposited without a tax deduction. Traditional IRA contributions are normally taxdeductible. However, if you have an employer sponsored retirement plan, such as a 401(k), your tax deduction may be limited.
In 2012, for single tax filers with an employer sponsored retirement plan, an IRA contribution is fully taxdeductible if your income is below $58,000. It is then prorated between $58,000 and $68,000. If your income is over $68,000 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 $92,000 and $112,000.
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 phaseouts are applied. First, if your spouse has an employer sponsored retirement plan but you do not, your tax deduction is phased out from $173,000 to $183,000. Second, if you are married filing separately and have an employer sponsored retirement plan, the income phaseout 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 taxdeductible contributions and 2) what you would have earned if you had invested (in an ordinary taxable account) any income tax savings.


