Contribution Per Year
The amount you will contribute to your Traditional IRA each year. This calculator assumes that you make your contribution at the beginning of each year. From 2008 through 2012, the maximum annual IRA contribution is $5,000 per individual. It is important to note that this is the maximum total contributed to all of your IRA accounts. The contribution limit increases with inflation in $500 increments. An annual change to the contribution limit only occurs if the cumulative effect of inflation since the last adjustment is $500 or more.
If you are 50 or older you can make an additional “catch-up” contribution of $1,000. The “catch-up” contribution amount of $1,000 remains unchanged for 2012. 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.
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 dependent on the type of investments you select. The S&P 500 for the ten years ending on December 31st, 2011 had an annual compounded rate of return of 2.92%, including reinvestment of dividends. From January 1970 through the end of 2011, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.01% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can’t be predicted with certainty and that investments that pay higher rates of return are generally 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. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.
Years Until Retirement
Years left until you 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 age 64.
Expected Rate of Return
The Percentage expected to be returned.
Marginal Tax Rate at Retirement
The marginal tax rate you expect to pay on your investments at retirement.