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IRA Calculator

The IRA calculator can be used to evaluate and compare Traditional IRAs, SEP IRAs, SIMPLE IRAs, Roth IRAs, and regular taxable savings. For comparison purposes, Roth IRA and regular taxable savings will be converted to after-tax values. To calculate Roth IRA with after-tax inputs, please use our Roth IRA Calculator. This calculator is mainly intended for use by U.S. residents.

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Result
Traditional,
SIMPLE,
or SEP IRA		 Roth
IRA		 Regular
Taxable
Savings
Balance at age 65 $1,066,343 $799,758 $563,434
Balance at age 65 (after tax) $906,392 $799,758 $563,434
A Traditional, SIMPLE, or SEP IRA account can accumulate $106,634 more after-tax balance than a Roth IRA account at age 65. A Roth IRA account can accumulate $236,324 more than a regular taxable savings account.
Balance Accumulation Graph
Traditional/SIMPLE/SEP IRA (before tax)
Traditional/SIMPLE/SEP IRA (after tax)
Roth IRA (after tax)
Regular taxable savings (after tax)
Principal
Annual Schedule
Age Traditional/SIMPLE/SEP IRA (Before Tax) Traditional, SIMPLE, or SEP IRA (After Tax) Roth IRA (After Tax) Regular Taxable Savings (After Tax)
Start End Start End Start End Start End
Fraction Arithmetic & IRA Asset Allocation Calculator

Calculate exact fractional asset allocations across Traditional, Roth, SEP IRA, and taxable accounts using precise fraction arithmetic (+, −, ×, ÷).

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7
12
Decimal Equivalent: 0.5833 (58.33%)
Step-by-Step Calculation: (1×4 + 1×3) / (3×4) = 7/12 → Simplified: 7/12
Asset Allocation Ratio: Represents the precise proportion allocated to the target asset class (e.g. 7/12 = 58.33% in tax-sheltered IRA vs 41.67% in taxable).

Understanding Individual Retirement Accounts (IRAs)

An Individual Retirement Account (IRA) is one of the most powerful wealth-accumulation tools available under the United States Internal Revenue Code. By providing tax advantages that shield investment growth from annual capital gains taxes, dividend taxes, and ordinary income taxation, IRAs allow individuals to compound their nest eggs far more efficiently than standard taxable brokerage accounts.

Traditional IRA vs. Roth IRA: Tax Deduction vs. Tax-Free Withdrawals

The central decision for most retirement savers is choosing between a Traditional IRA and a Roth IRA:

  • Traditional IRA: Contributions are typically tax-deductible in the year they are made, lowering your adjusted gross income (AGI) immediately. The capital grows tax-deferred over your career. Upon reaching retirement (minimum age 59½), withdrawals are taxed as ordinary income at your future marginal income tax rate. If your tax bracket is expected to be lower in retirement than it is today, a Traditional IRA typically delivers higher after-tax wealth.
  • Roth IRA: Contributions are made using after-tax earnings with no immediate deduction. In exchange, all future investment returns, capital appreciation, and qualified distributions taken in retirement are 100% tax-free. Roth accounts also have no lifetime Required Minimum Distributions (RMDs), making them exceptional vehicles for multi-generational estate planning.

Understanding the Cost of "Tax Drag" on Regular Savings

In a standard non-retirement brokerage account, every interest payment, stock dividend, and capital gain realized through portfolio rebalancing triggers an immediate tax liability in the current year. This annual friction is known as tax drag. Over 20, 30, or 40 years of compounding, tax drag significantly erodes total net growth. As shown in the comparison table above, an identical annual investment can accumulate hundreds of thousands of dollars more inside an IRA than in an ordinary taxable savings account, even after all retirement taxes are paid.

SEP and SIMPLE IRAs for Self-Employed and Small Business Owners

Entrepreneurs, freelancers, and small business employees can access expanded contribution ceilings through employer-sponsored IRA plans:

  • SEP IRA (Simplified Employee Pension): Enables self-employed professionals and small businesses to contribute up to 25% of net self-employment earnings, up to $69,000 in 2024 ($70,000 in 2025). Contributions are fully tax-deductible.
  • SIMPLE IRA (Savings Incentive Match Plan for Employees): Designed for businesses with fewer than 100 employees, allowing employee salary deferrals up to $16,000 in 2024 ($16,500 in 2025), plus catch-up additions and mandatory employer matching.

Retirement Accounts Comparison Matrix

Account Type Upfront Tax Benefit Tax on Growth Withdrawal Taxation RMD Requirement
Traditional IRA Tax-deductible (income limits apply) Tax-deferred Taxed as ordinary income Yes (age 73)
Roth IRA None (funded with after-tax dollars) Tax-free 100% tax-free in retirement No lifetime RMDs
SEP IRA Pre-tax employer deduction (up to $69k+) Tax-deferred Taxed as ordinary income Yes (age 73)
Regular Taxable None Taxed annually (dividends/gains) Tax-free capital return; gains taxed No RMDs

Frequently Asked Questions (FAQ)

How much can I contribute to an IRA in 2024 and 2025? ▼
For tax years 2024 and 2025, the maximum total contribution limit across all Traditional and Roth IRAs is $7,000 for individuals under age 50. Individuals aged 50 or older can contribute an additional $1,000 catch-up contribution, raising their maximum limit to $8,000 per year.
Can I contribute to both a 401(k) and an IRA in the same calendar year? ▼
Yes, you can contribute to both an employer-sponsored 401(k) and an individual IRA in the same year. However, if you or your spouse are covered by a workplace retirement plan, your ability to deduct Traditional IRA contributions phases out at higher Modified Adjusted Gross Income (MAGI) thresholds. Roth IRA contributions are subject to their own separate income phase-out limits.
What happens if I withdraw money from my Traditional IRA before age 59½? ▼
Non-qualified early withdrawals from a Traditional IRA are generally subject to regular income taxes plus a 10% IRS early distribution penalty. Exceptions include qualified higher education expenses, up to $10,000 for first-time homebuyer acquisition, certain unreimbursed medical expenses, and disability.
Why does fraction arithmetic matter for multi-account retirement strategies? ▼
Sophisticated retirement investors use "tax location" strategies, placing tax-inefficient assets (like high-yield bonds and REITs) in Traditional or Roth IRAs and tax-efficient index funds in taxable accounts. Fraction arithmetic prevents rounding loss when splitting deposits into exact proportions (such as 1/3, 1/4, or 5/12).