IRA Calculator
Project your Traditional IRA balance at retirement and estimate tax savings.
🏛️ What is a Traditional IRA?
An Individual Retirement Account (IRA) is a tax-advantaged savings account you open independently - not through an employer - for long-term retirement savings. A Traditional IRA offers potential tax deductions on contributions and tax-deferred growth, meaning you don't pay taxes on investment gains each year. You pay ordinary income tax only when you withdraw money in retirement. This makes a Traditional IRA particularly valuable for people who expect to be in a lower tax bracket in retirement than during their working years.
For 2024, the IRA contribution limit is $7,000 per year ($8,000 for those 50 or older, with the catch-up provision). Contributions must be funded with earned income - wages, salaries, or self-employment income. Deductibility depends on your income and whether you or your spouse are covered by a workplace retirement plan like a 401k. If neither you nor your spouse has a workplace plan, contributions are always fully deductible regardless of income level.
The power of a Traditional IRA comes from tax-deferred compounding. Every dollar you would have paid in taxes stays invested and continues growing. Over a 30–35 year career, this tax deferral can add hundreds of thousands of dollars to your final balance compared to a taxable account growing at the same rate. Required Minimum Distributions (RMDs) must begin at age 73 under the SECURE 2.0 Act.
📐 IRA Growth Formula
The IRA balance formula combines the compound growth of the existing balance with the future value of annual contributions (annuity-due, contributions made at start of year). Annual tax savings is the immediate benefit of the deduction - if your marginal rate is 22% and you contribute $7,000, you save $1,540 in income tax that year. Over a career, these annual savings themselves compound significantly when reinvested.
📖 How to Use This Calculator
Steps
💡 Example Calculations
Example 1 - Age 30, $7,000/Year at 7% to Age 65
Contribution = $7,000/year | Balance = $20,000 | Age 30→65 | Return = 7% | Tax Rate = 22%
Example 2 - Late Starter, Age 45 with Catch-Up
Contribution = $8,000/year | Balance = $80,000 | Age 50→65 | Return = 7% | Tax Rate = 24%
❓ Frequently Asked Questions
🔗 Related Calculators
What is an IRA and who can contribute?
An Individual Retirement Account (IRA) is a tax-advantaged account you open yourself (not through an employer) for retirement savings. Anyone with earned income (wages, salaries, self-employment income) can contribute to a Traditional IRA. For 2024, the contribution limit is $7,000 ($8,000 for those 50+). Unlike a 401k, IRAs are not offered through employers - you open them with a broker or bank of your choice.
Are Traditional IRA contributions tax-deductible?
Traditional IRA contributions may be fully deductible, partially deductible, or non-deductible depending on your income and whether you (or your spouse) are covered by a workplace retirement plan. If neither you nor your spouse has a workplace plan, contributions are always fully deductible regardless of income. If you have a workplace plan, the deduction phases out at $77,000–$87,000 (single) or $123,000–$143,000 (married filing jointly) in 2024.
What is the difference between Traditional IRA and Roth IRA?
Traditional IRA: contributions may be tax-deductible; growth is tax-deferred; withdrawals in retirement are taxed as ordinary income; required minimum distributions (RMDs) start at age 73. Roth IRA: contributions are made with after-tax money (no deduction); growth is tax-free; qualified withdrawals in retirement are completely tax-free; no RMDs during the owner's lifetime. Traditional IRA is better if you expect a lower tax rate in retirement; Roth IRA is better if you expect a higher rate.
When can I withdraw from an IRA without penalty?
Penalty-free withdrawals from a Traditional IRA can begin at age 59½. Early withdrawals (before 59½) are subject to a 10% penalty plus ordinary income tax. Exceptions include: first-time home purchase (up to $10,000 lifetime), higher education expenses, health insurance premiums while unemployed, disability, and substantially equal periodic payments (Rule 72t). Required Minimum Distributions must begin at age 73.
What is the IRA contribution limit for 2024?
The IRA contribution limit for 2024 is $7,000 per person ($8,000 if age 50 or older). This is the combined limit for all IRAs you own - you can split it between a Traditional and Roth IRA, but the total across both accounts cannot exceed $7,000. Income limits apply for Roth IRA contributions but not for Traditional IRA contributions (though deductibility may be limited based on income and workplace plan coverage).
What is the IRA contribution limit for 2025?
For 2025, the IRA contribution limit is $7,000 per year ($8,000 if age 50 or older, due to the $1,000 catch-up contribution). This limit applies across all your IRAs combined (traditional + Roth). Income limits apply to Roth IRA contributions and Traditional IRA deductibility if covered by a workplace plan.
What is the difference between a Traditional IRA and a Roth IRA?
Traditional IRA: contributions may be tax-deductible; growth is tax-deferred; withdrawals are taxed as ordinary income. Roth IRA: contributions are after-tax (no deduction); growth and qualified withdrawals are completely tax-free. Roth is better if you expect to be in a higher tax bracket in retirement. Traditional is better if you want a deduction now.
Can I contribute to both a 401(k) and an IRA?
Yes. You can max out both a 401(k) ($23,500 for 2025) and an IRA ($7,000) in the same year for $30,500 in total tax-advantaged contributions. However, if you participate in a workplace plan, your Traditional IRA deduction phases out at certain income levels. Roth IRA eligibility also phases out above certain income thresholds.