
Traditional IRA Calculator
Contributing to a Traditional IRA can create a current tax deduction, plus
it provides for tax deferred growth. While long term savings in a Roth IRA may
produce better after tax returns, a Traditional IRA may be an excellent
alternative if you qualify for the tax deduction.
Definitions
 Annual contribution
 The amount you will contribute to your Traditional IRA each year. This
calculator assumes that you make your contribution at the beginning of each
year. In 2005, the maximum annual IRA contribution is $4,000 per individual. It
is important to note that this is the maximum total contributed to all of your
IRA accounts. This maximum will increase to $5,000 by 2008. The table below
summarizes IRA annual contribution limits.
Year 
IRA contribution
limit 
20022004 
$3,000 
20052007 
$4,000 
2008 and after* 
$5,000 
*Beginning in 2009, the contribution limit will adjust annually for
inflation in $500 increments
If you are 50 or older you can make additional "catchup"
contributions of $500 more than the normal limits in 2002 through 2005.
Starting in 2006, the "catchup" amount will increase to $1,000. 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.
 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. From January 1970 to December 2004, the average
compounded rate of return for the S&P 500, including reinvestment of
dividends, was approximately 11.5% per year. During this period, the highest
12month return was 64%, and the lowest was 39%. Savings accounts at a bank
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 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.
 Current age
 Your current age.
 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 age 64.
 Current tax rate
 Your current marginal 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
 What you anticipate your income to be. This is used to calculate whether
you are able to deduct your annual contributions from your taxes. It is
important to note that there are no income limits preventing you from
contributing to a Traditional IRA. Annual income only affects your ability to
make a tax deductible contribution.
 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. For more information on how an employer plan can
affect your IRA tax deduction, see the definition for nondeductible
contributions, directly below.
 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 2005, for single tax filers with an
employer sponsored retirement plan, an IRA contribution is fully taxdeductible
if your income is below $50,000. It is then prorated between $50,000 and
$60,000. If your income is over $60,000 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 70,000
and $80,000. The phaseout ranges are scheduled to increase over the next few
years. The table below summarizes the deduction phaseout for 2003  2007.
Traditional IRA Deduction Income PhaseOut Ranges 
Year 
Single Taxpayers 
Married Taxpayers Filing
Jointly 
2003 
$40,000$50,000 
$60,000$70,000 
2004 
$45,000$55,000 
$65,000$75,000 
2005 
$50,000$60,000 
$70,000$80,000 
2006 
$50,000$60,000 
$75,000$85,000 
2007 
$50,000$60,000 
$80,000$100,000 
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 $150,000 to $160,000. 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 this IRA.
 IRA total before taxes
 Total value of your IRA at retirement before taxes.
 IRA total after taxes
 Total value of your IRA at retirement after taxes are paid.
 Total taxable account
 Total value of your savings, at retirement, if the after tax contribution
amount is deposited into a taxable account. This value, which we call your
"Taxable Account Deposit" is calculated by assuming you could save an
amount equal to the after tax cost of contributing to a Traditional IRA. Your
"Taxable Account Deposit" then is equal to your Traditional IRA
contribution minus any tax savings. For example, assume you have a 30% combined
state and federal tax rate. If you contribute $2000 to a Traditional IRA and
qualify for the full $2000 tax deduction, the value of your tax deduction is
$2000 X 30% or $600. The after tax cost of contributing to your Traditional IRA
would then be $2000 minus $600 or $1400. If you do not qualify for tax
deductible Traditional IRA contributions, your "Taxable Account
Deposit" will be the same as your Traditional IRA contribution.
In
addition, all earnings in your taxable account are assumed to be taxable in the
year they are earned.


