IRA Comparison Calculator: Traditional vs Roth vs Taxable Savings
IRA Comparison Calculator
Investment Comparison Results
| Item | Traditional, SIMPLE, or SEP IRA | Roth IRA | Regular Taxable Savings |
|---|---|---|---|
| Balance (after tax) |
💡 Key Insight
Investment Growth Analysis
Annual Projection Schedule
| Traditional/SIMPLE/SEP IRA (Before Tax) | Traditional, SIMPLE, or SEP IRA (After Tax) | Roth IRA (After Tax) | Regular Taxable Savings (After Tax) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Age | Start | Interest | Contribution | End | Start | Interest | Tax of Interest | Contribution | End | Start | Interest | Tax of Interest | Contribution | End | Start | Interest | Tax of Interest | Contribution | End |
How to Use This IRA Comparison Calculator
This retirement planning tool helps you compare the long-term performance of Traditional IRAs, SEP IRAs, SIMPLE IRAs, Roth IRAs, and regular taxable savings accounts. Follow these steps for accurate results:
Step-by-Step Instructions
- Current Balance: Enter your existing retirement savings balance across all accounts you're comparing.
- Expected Annual Return: Input your anticipated investment return rate (historical stock market average is approximately 6-10%).
- Age Information: Provide your current age and planned retirement age to calculate the investment timeline.
- Annual Contributions: Enter your planned yearly contributions before age 50 and after (catch-up contributions allowed).
- Tax Rates: Input your current marginal tax rate and expected tax rate in retirement.
2025 IRA Contribution Limits
- Traditional & Roth IRA: $7,000 annually ($8,000 if age 50+)
- SEP IRA: Lesser of 25% of compensation or $70,000
- SIMPLE IRA: $16,000 annually ($19,500 if age 50+)
Source: IRS.gov - IRA Contribution Limits
Calculation Formulas
Traditional IRA (Pre-tax)
Annual Growth: Balancen+1 = (Balancen + Contributionn) × (1 + Interest Rate)
After-tax Value: After-tax Balance = Pre-tax Balance × (1 - Tax Rate in Retirement)
Roth IRA (After-tax)
After-tax Contribution: Roth Contribution = Pre-tax Contribution × (1 - Current Tax Rate)
Annual Growth: Balancen+1 = (Balancen + After-tax Contributionn) × (1 + Interest Rate)
Regular Taxable Savings
After-tax Interest: Net Interest = Interest × (1 - Tax Rate)
Annual Growth: Balancen+1 = Balancen + Net Interest + After-tax Contribution
Understanding IRA Types and Tax Implications
Traditional IRA
Contributions are typically tax-deductible, reducing your current taxable income. Investments grow tax-deferred, but withdrawals in retirement are taxed as ordinary income. Required Minimum Distributions (RMDs) begin at age 73.
Roth IRA
Contributions are made with after-tax dollars, so there's no immediate tax deduction. However, qualified withdrawals in retirement are completely tax-free, including all investment gains. No RMDs during the account owner's lifetime.
SEP IRA and SIMPLE IRA
These are employer-sponsored retirement plans that function similarly to Traditional IRAs for tax purposes. SEP IRAs allow higher contribution limits for self-employed individuals and small business owners.
Regular Taxable Savings
No contribution limits or withdrawal restrictions, but investment gains are subject to capital gains taxes, and interest/dividends are taxed annually.
Key Factors to Consider
- Current vs. Future Tax Rates: If you expect to be in a lower tax bracket in retirement, Traditional IRA may be advantageous. If you expect higher taxes in retirement, Roth IRA could be better.
- Time Horizon: Longer investment periods generally favor Roth IRAs due to tax-free growth.
- Required Minimum Distributions: Roth IRAs don't require RMDs, providing more flexibility in retirement.
- Estate Planning: Roth IRAs can be more beneficial for leaving assets to heirs.
- Income Limits: High earners may be restricted from contributing directly to Roth IRAs.
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