Which is better: a Roth IRA or a Traditional IRA?

Which is better: a Roth IRA or a Traditional IRA?

An IRA can be an effective retirement tool. There are two basic types of Individual retirement accounts (IRA), the Roth IRA and the Traditional IRA. Use this calculator to determine which IRA is right for you.

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Definitions
Current age:	Your current age.
Annual contribution:	The amount you will contribute to your IRA each year. The maximum contribution is $2000 per year. This calculator assumes that you make your contribution at the beginning of each year. Depending on your annual income and if you have an employer retirement plan, all or a portion of your Traditional IRA contribution may be tax deductible. For Single people a Traditional IRA contribution is fully tax deductible if your income is below $25,000. It is then prorated between $25,000 to $35,000. If your income is over $35,000 you receive no tax deduction. For married couples if your annual income is under $40,000 your contribution is fully tax deductible. If your income is over $50,000 there is no tax deduction. The deduction is prorated between $40,000 to $50,000. If you have no employer plan your contribution is tax deductible regardless of your income and tax filing status. A Traditional IRA requires you to pay taxes on all interest earned when you make withdrawals. You will also pay taxes on any tax deductible contributions you withdraw. A Roth IRA contribution is not tax deductible, but all contributions and earnings are tax free when you make withdrawals. It is important to note that some high income households do not qualifiy for a Roth IRA contribution. Currently, single filers with incomes over $110,000 cannot make Roth IRA contributions. If you are married and your household income is over $160,000 you are also excluded from making Roth IRA contributions. There are no income limits for contributing to a regular IRA. For the purposes of this calculator, we assume that your income does not limit your ability to contribute to a Roth IRA.
Expected rate of return:	The annual percent you expect to earn on your investment.
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 64.
Current tax rate:	The current marginal income 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:	Your adjusted gross income from your taxes. This is used to calculate whether you are able to deduct your annual contributions from your income tax statement.
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 401k or pension. This is used to determine if you can deduct your annual contributions from your taxes.
Total non-deductible contributions:	For a Traditional IRA, this is the total amount of your contributions that were deposited without a current year tax deduction. (Roth IRA contributions are always non-deductible)
Total contributions:	The total amount contributed to your IRA.
IRA total after taxes:	For the Roth IRA this is the total value of the account. For the Traditional IRA this the sum of two parts: 1) The value of the account after you pay income taxes on all earnings and tax deductible contributions and 2) what you would have earned if you had invested (in a ordinary taxable account) any income tax savings.

Information and interactive calculators are made available to you as self-help tools for your independent use. We can not and do not guarantee their accuracy or their applicability to your circumstances. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.