Definitions
- Annual contribution
- The amount you will contribute to your ROTH
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 |
| 2002-2004 |
$3,000 |
| 2005-2007 |
$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 "catch-up" contributions of $500 more than the
normal limits in 2002 through 2005. Starting in 2006, the
"catch-up" amount will increase to $1,000. In order to
qualify for the "catch-up" contribution, you must turn 50
by the end of the year in which you are making the contribution.
It is important to note that Roth IRA
contributions are limited for higher incomes. If your income falls
in a "phase-out" range you are allowed only a prorated
Roth IRA contribution. If your income exceeds the phase-out range,
you do not qualify for any Roth IRA contribution. For the purposes
of this calculator, we assume that your income does not limit your
ability to contribute to a Roth IRA. The table below summarizes the
income "phase-out" ranges for Roth IRAs.
| Tax
filing status |
Income
Phase-Out Range |
| Married
filing jointly or Head of household |
$150,000
to $160,000 |
| Single |
$95,000
to $110,000 |
| Married
filing separately |
$0
to $10,000 |
- 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 dependant 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 12-month 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 long-term
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 is
assumed to have happened when you were actually 64.
- Marginal tax rate
- The marginal tax rate you expect to pay on
your taxable investments.
- Roth total at retirement
- Total value in your Roth IRA at your
retirement.
- Total taxable savings
- The total amount you would have accumulated
by retirement in a taxable savings account.
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