November 5, 2024
| Tax Rate | Married Filing Jointly or Qualified Widow(er) | Single | Head of Household | Married Filing Separately |
|---|---|---|---|---|
| 10% | $0 to $20,550 | $0 to $10,275 | $0 to $14,650 | $0 to $10,275 |
| 12% | $20,551 to $83,550 | $10,276 to $41,775 | $14,651 to $55,900 | $10,276 to $41,775 |
| 22% | $41,776 to $89,075 | $41,776 to $89,075 | $55,901 to $89,050 | $83,551 to $178,150 |
| 24% | $178,151 to $340,100 | $89,076 to $170,050 | $89,051 to $170,050 | $89,076 to $170,050 |
| 32% | $340,101 to $431,900 | $170,051 to $215,950 | $170,051 to $215,950 | $170,051 to $215,950 |
| 35% | $431,901 to $647,850 | $215,951 to $539,900 | $215,951 to $539,900 | $215,951 to $323,925 |
| 37% | $647,851 or more | $539,901 or more | $539,901 or more | $323,926 or more |
Source: IRS
| Filing Status | Modified Adjusted Gross Income (MAGI) | Contribution Limit |
|---|---|---|
| Single, Head of Household | Less than $146,000 | Full contribution |
| $146,000 – $161,000 | Reduced contribution | |
| More than $161,000 | No contribution | |
| Married Filing Jointly | Less than $230,000 | Full contribution |
| $230,000 – $240,000 | Reduced contribution | |
| More than $240,000 | No contribution | |
| Married Filing Separately | Less than $10,000 | Reduced contribution |
| More than $10,000 | No contribution |
Source: IRS
1. Roth IRA
2. Traditional IRA
3. Contribution Limit
4. Modified Adjusted Gross Income (MAGI)
5. Contribution Phaseouts
6. Annual Contribution
7. Initial Amount
8. Rate of Return
9. Contribution Tax Rate
10. Withdrawal Tax Rate
11. Total Contributions
12. Total Growth
13. Total Taxes Paid
14. Net Withdrawal
| Scenario | IRA Type | Total Contributions | Total Growth | Total Taxes Paid | Net Withdrawal |
|---|
This IRA calculator is designed for educational purposes only. It provides a simplified model for estimating the future value of your IRA based on user inputs such as initial amount, annual contributions, rate of return, and tax rates. While the calculator aims to give you a broad understanding of how different variables affect your retirement savings, it should not be used as a definitive financial planning tool.
What this calculator does:
What this calculator does not include:
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The Roth IRA vs. IRA Calculator provided by SeniorCenters.com is intended solely for educational purposes. The results generated by this tool are estimates based on the input provided by the user and do not constitute financial advice. SeniorCenters.com makes no claims regarding the accuracy or completeness of the results and is not responsible for any actions taken based on the information provided by this tool. Users should consult with a qualified financial advisor before making any investment decisions. By using this tool, you acknowledge and agree to this disclaimer.
| Tax Rate | Married Filing Jointly or Qualified Widow(er) | Single | Head of Household | Married Filing Separately |
|---|---|---|---|---|
| 10% | $0 to $20,550 | $0 to $10,275 | $0 to $14,650 | $0 to $10,275 |
| 12% | $20,551 to $83,550 | $10,276 to $41,775 | $14,651 to $55,900 | $10,276 to $41,775 |
| 22% | $41,776 to $89,075 | $41,776 to $89,075 | $55,901 to $89,050 | $83,551 to $178,150 |
| 24% | $178,151 to $340,100 | $89,076 to $170,050 | $89,051 to $170,050 | $89,076 to $170,050 |
| 32% | $340,101 to $431,900 | $170,051 to $215,950 | $170,051 to $215,950 | $170,051 to $215,950 |
| 35% | $431,901 to $647,850 | $215,951 to $539,900 | $215,951 to $539,900 | $215,951 to $323,925 |
| 37% | $647,851 or more | $539,901 or more | $539,901 or more | $323,926 or more |
Source: IRS
| Filing Status | Modified Adjusted Gross Income (MAGI) | Contribution Limit |
|---|---|---|
| Single, Head of Household | Less than $146,000 | Full contribution |
| $146,000 – $161,000 | Reduced contribution | |
| More than $161,000 | No contribution | |
| Married Filing Jointly | Less than $230,000 | Full contribution |
| $230,000 – $240,000 | Reduced contribution | |
| More than $240,000 | No contribution | |
| Married Filing Separately | Less than $10,000 | Reduced contribution |
| More than $10,000 | No contribution |
Source: IRS
1. Roth IRA
2. Traditional IRA
3. Contribution Limit
4. Modified Adjusted Gross Income (MAGI)
5. Contribution Phaseouts
6. Annual Contribution
7. Initial Amount
8. Rate of Return
9. Contribution Tax Rate
10. Withdrawal Tax Rate
11. Total Contributions
12. Total Growth
13. Total Taxes Paid
14. Net Withdrawal
Tax Treatment: Contributions are made with after-tax dollars, and qualified withdrawals are tax-free.
Tax Treatment: Contributions may be tax-deductible, and withdrawals are taxed as ordinary income.
Eligibility: Contributions are limited by income; single filers must have a MAGI of less than $146,000 for full contributions in 2024.
Eligibility: No income limits for contributions, but tax deductibility may be limited if covered by a retirement plan at work.
Required Minimum Distributions: Not required during the account holder’s lifetime.
Required Minimum Distributions: Required starting at age 72.
Withdrawal Rules: Contributions can be withdrawn at any time without taxes or penalties; earnings can be withdrawn tax-free after age 59½ and meeting the 5-year rule.
Withdrawal Rules: Withdrawals before age 59½ may be subject to taxes and a 10% penalty, with some exceptions.
Tax Benefits: Tax-free growth and withdrawals.
Tax Benefits: Tax-deferred growth and potential tax-deductible contributions.
Best For: Individuals who expect to be in a higher tax bracket during retirement.
Best For: Individuals who expect to be in a lower tax bracket during retirement.
In this scenario, you’re 22, you just landed a high paying job right out of college, and are already thinking about retirement. You’ve got $6,000 to invest, with no plans to add more annually, and you’re aiming for an 8% annual return until you retire at 60. Let’s factor in taxes: a hefty 32% on contributions currently but a lighter 22% when you withdraw.
With a Roth IRA, you pay taxes upfront. Your $6,000 investment is reduced to $4,080 after the 32% tax bite, but it grows tax-free over the years to $71,911.12. The good news? When you retire, you withdraw every penny of that $75,991.12 tax-free. You’ve paid $1,920 in taxes initially, but nothing more after that.
On the flip side, a Traditional IRA lets you invest the full $6,000 upfront, deferring taxes until you retire. This grows to a robust $105,751.65 by retirement. When you withdraw, you’ll pay the 22% tax rate, amounting to $24,585.36 in taxes. Despite this, you end up with a net withdrawal of $87,166.29.
In this scenario, the Traditional IRA shines. Even though you’re hit with a significant tax bill at retirement, you walk away with more money compared to the Roth IRA. The Traditional IRA’s larger initial investment and tax-deferred growth give it an edge, leading to a higher net withdrawal. Additionally, since you are withdrawing the money at a lower tax rate (22%) compared to the higher tax rate (32%) you paid on your Roth IRA contributions, you save on taxes overall. This strategy of deferring taxes until retirement, when you expect to be in a lower tax bracket, proves more beneficial here.
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