Let’s say you’re trying to tackle this whole retirement thing, and that means it’s time to beef up your savings. If you’re looking into an individual retirement account (IRA), you’ll have to decide between a traditional or Roth IRA. There are a number of factors that go into picking the best option, and this calculator can help you decide.
Traditional and Roth IRAs are different in quite a few ways, but it mostly comes down to this:
- Traditional IRAs are tax-deferred, meaning any money you save in them is subtracted from your taxable income that year. When you withdraw the money at retirement, you’ll pay taxes on the money.
- Roth IRAs are taxed now. You don’t get that tax-deferral option, but when you take the money out at retirement, you don’t have to pay taxes, because you already paid.
We’ve told you the ins and outs of how IRAs work, so you’ll want to thoroughly research which option is best for you. But this calculator can at least put you in the right direction. You enter in details about your tax rate, savings rate, expected savings return, and so on. From there, the calculator tells you how much you can expect to earn (considering taxes and return) with one type of IRA over another. You’ll even get graphs that show a side by side comparison.http://ift.tt/1D59DEr…
In order to work, the calculator asks you to plug in your expected retirement rate, and of course, that’s just an estimate, so this isn’t an exact science. Still, it’s a helpful tool because you can adjust the amounts and see just how much you’d earn with each option. You can also see how those numbers change as your tax bracket changes.
Give it a try for yourself at the link below.
Roth IRA vs. Traditional IRA | Dinkytown
via Lifehacker
This Calculator Will Help You Decide Between a Roth or Traditional IRA