Retirement Comparison Calculator - ROTH and IRA

Retirement planning calculator: Compare traditional IRA and ROTH retirement calculations, plan for your retirement. Enter details of one or both plans to compare how your investment can perform in the retirement plans. For simplicity, we have added some example figures in the calculator for a retirment fund of $1k per annum.

Retirement Comparison Calculator - ROTH and IRA Calculator
Traditional IRARoth IRA
Annual Contribution ($)
Contribution is:
Current Tax Rate (%)
Nett Amount
Saving period (years)
Rate of Return (%)
On Maturity
Maturity amount ($)
Total Tax payablen/a
Nett Amount ($)
[ 1 Votes ]

Payment Schedule

The payment schedule below is based on a fixed annual contribution and rate of return as above

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Retirement Plan Comparison Table
Traditional IRARoth IRA
Payment numberNett AmountTax PaidInterestBalanceGross AmountTax paidNett AmountInterestBalance
Total Amounts: Total amounts paid over the amorization period
Traditional IRARoth IRA
Payment numberNett AmountTax PaidInterestBalanceGross AmountTax paidNett AmountInterestBalance
Totals

ROTH and Traditional (Individual Retirement Account) IRAs : Two good ways towards Tax-advantaged Savings

ROTH and IRA Calculator. This image provides details of how to calculate the compound annual growth rate using a good calculator, a pencil and paper. By using the ROTH IRA formula, the IRA Comparison Calculator provides a comparison calculation of the retirement fund provided by ROTH IRA and Traditional IRA retirement saving plans

Confused about choosing between ROTH and Traditional IRA? Though both types of accounts will give you a tax break, it is important to understand which IRA is the better choice for you.

ROTH and traditional IRAs both are tax advantaged accounts. Both ensure tax savings. The main difference between both is the way taxes are levied on investors. Where ROTH IRA is popular for its delayed tax advantage, traditional IRA works towards instant tax savings. They also differ in other ways like accessibility of funds and eligibility standards.

Key differences between ROTH and Traditional IRA

These accounts have many similarities, however there are many differences as well. Let's take a look at the key differences between ROTH and traditional IRAs.

Tax advantage

Both ROTH and traditional IRAs provide general tax breaks, the only difference is when you actually get them; it is all a matter of time. In a ROTH IRA you don't get immediate tax relief, which means you make contributions to these accounts with post taxed income. But this generally makes your withdrawals in retirement tax free.

Whereas in Traditional IRAs you make your contributions with the income before tax that means immediate tax break as it lowers the taxable income of the investor. As a result, at the time of retirement, withdrawals or distributions are taxed on the normal tax rate when you make them.

Distribution rules

In traditional IRAs withdrawals are subject to an age limit. After the age of 70½ it is mandatory to withdraw a minimum amount from the IRA, whether you need the money or not. The minimum limit is based on the size of your account.

Roth IRAs don't follow such rules. You don't need to withdraw any amount at any point of time and age. Since ROTH IRAs come with the advantages like rollover and passing on of investments as an inheritance it is possible to keep the savings even for a lifetime.

Age limits

There is an age limit on traditional IRAs. There can be no contributions made after the age of 70½. No age limit on contributions in ROTH IRAs.

Income requirements

Spousal IRA contributions are allowed in ROTH IRAs. It is possible for non-earning spouse to opt for a ROTH IRA and have his earning spouse make the contribution on their behalf. Traditional IRAs follow "Must have earned income" rule, which means you cannot have a traditional IRA if you are not earning.

Extra benefits

Facilities like transfer, rollover of investments and passing the money to your heirs are allowed in ROTH IRA. Traditional IRA does not offer these facilities.

Using the IRA Comparison Calculator

The comparison between ROTH and traditional IRA is crucial when it comes to making retirement plans. Using the calculator, you can see both IRAs calculations in a way that will give you a quick comparison too.

Below are the details that are required to be entered to find out the results on calculator.

  1. Annual contribution: Here you will enter the amount that you can comfortably invest annually.
  2. Savings period: The total number of years that you are planning on investing until retirement.
  3. Rate of return: Interest rate (as expected or offered by investment company or bank) that is payable annually.
  4. Current tax rate: Tax rate is required if the income value entered is before tax.
  5. Maturity amount: The total expected amount on maturity.
  6. Result = Net amount: Here you will find the net amount you can expect to receive upon withdrawing your investments.

Additionally, the retirement comparison calculator will provide you two different charts. The payment schedule will show you year on year contribution and rate of return. And the total amount chart will show you the total amounts paid over the amortization period.

In summary

To summarize the comparison of ROTH and traditional IRAs there is one essential question that arises. Do you think your tax rate will be higher or lower in the future? If you are expecting lower tax rate at the time of your retirement, you should choose traditional IRA and keep investing pre-taxed income.

If you are expecting higher tax rates by the time you retire you should go for ROTH IRA. You will be able to invest only post taxed income but at the time of distribution all your savings will be tax free.