Traditional IRA Calculator
A traditional IRA is the individual counterpart to a 401(k): a deduction now, tax-deferred growth, and income tax on withdrawal. What distinguishes it is that the deduction is conditional in a way the 401(k)'s is not.
The Deduction Phases Out
If neither you nor a spouse is covered by a workplace retirement plan, the contribution is fully deductible at any income. If either of you is covered, the deduction phases out across an income band that differs by filing status and by which spouse is covered.
Above the band you can still contribute — you just get no deduction, which produces a non-deductible IRA with a cost basis you must track on Form 8606 for the rest of the account's life.
The Backdoor, and Its Trap
High earners barred from a Roth IRA sometimes contribute to a non-deductible traditional IRA and convert. The pro-rata rule is what catches people: the conversion is taxed in proportion to the *pre-tax* share of all your traditional, SEP and SIMPLE IRAs combined — not just the account you converted.
With $93,000 of pre-tax IRA money and a $7,000 non-deductible contribution, 93% of any conversion is taxable. Rolling existing pre-tax IRA balances into a 401(k) first is the usual way around it.
Required Minimum Distributions
Traditional IRAs require withdrawals from the RMD age onward, calculated from the balance and an IRS life-expectancy factor. The penalty for missing one is severe, though reduced if corrected promptly.
Roth IRAs have no RMDs during the owner's lifetime, which is a significant planning difference late in life.
Traditional or Roth
| Favour traditional when | Favour Roth when |
|---|---|
| You are near peak earnings | You are early career |
| Your state taxes income now, and you will retire somewhere that does not | The reverse |
| You expect a lower bracket in retirement | You expect a higher one |
| You want the deduction to fund more saving | You want no RMDs and tax-free heirs |
Early Withdrawal
Before 59½, withdrawals owe income tax plus a penalty, with exceptions for first-home purchase, qualified education, substantial medical expenses and a few others. The penalty is the smaller cost; the permanent loss of compounding is the larger one.
The Projection Behind This Page
Starting from $10,000, adding $200 a month at 7%:
| Year | Deposited | Balance | Growth | Growth on deposits |
|---|---|---|---|---|
| 1 | $12,400 | $13,201 | $801 | 6% |
| 5 | $22,000 | $28,495 | $6,495 | 30% |
| 10 | $34,000 | $54,714 | $20,714 | 61% |
| 20 | $58,000 | $144,573 | $86,573 | 149% |
The Formula
``
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) ÷ (r/n)]
└── initial principal ──┘ └────── regular contributions ──────┘
``
The second term usually dominates. On these numbers the $200 monthly contribution accounts for the larger share of the final balance, which is the practical lesson: how much you add matters more than the rate, right up until the balance gets large.