About the IRA Calculator
An IRA (Individual Retirement Account) is a self-directed retirement account that nearly any US worker with earned income can open — independent of a workplace plan — with a 2026 contribution cap of $7,500/yr ($8,600 with the age-50+ catch-up).
Both IRA flavors grow the same way: tax-deferred, or in a Roth’s case tax-free. The difference is the timing of taxes — dedicated to the future on a traditional IRA, prepaid on a Roth — so the projection tool shows the compounding honestly with a clear tax-treatment note for the type you enter.
The formula behind it
Standard compounding on a level annual flow:
FV = Balance × (1+r)^y + contribution × ((1+r)^y − 1)/rGrowing your current balance and annual contributions at one annual rate r over y years. The tool explains on the results panel what taxes mean for the type selected: traditional contributions are usually pre-tax and withdrawals taxed; Roth contributions are post-tax and qualified withdrawals tax-free.
Worked example
Defaults — $15,000 balance, max contribution of $7,500/yr, 25 years at 7%:
- The balance alone grows to about $81,500.
- Contributions total $187,500 over 25 years; compounding at 7% turns them into about $474,400.
Takeaway: Projected value ≈ $556,000. On a Roth all of it is income-tax-free; on a traditional the future withdrawals are taxed — rarely a reason to prefer it, and a reason to keep this tool open when comparing.
What moves the result
- Contribution level — $7,500 (2026) is the cap unless you are 50+, when the $1,100 catch-up applies.
- Deductibility — if a workplace plan covers you or your spouse, higher incomes phase out traditional-IRA deductions (2026 ranges start at $81k single / $129k MFJ).
- Contribution frequency — annual-at-a-time is a fair simplification; monthly compounding shifts the figure up modestly.
- Return rate — IRA fund choices are unmanaged by an employer budget; market-based, reasonable assumptions only.
Practical tips
- When in doubt between traditional and Roth: Roth locks the taxes paid, protecting you from future bracket creep; traditional defers while you earn in today’s, presumably lower brackets — model both for your future income & personal circumstances.
- Confirm the income phase-out if a workplace plan covers you — 2026 ranges kick in above $81k single / $129k MFJ for traditional deductibility.
- Deadline: IRA contributions must be in by the tax-filing deadline (not April 15 for some years; wait for actual dates each year).
- Beware the "one big thing:" withdrawing early from an IRA may add a 10% penalty on top of tax on traditional withdrawals — for that reason leave it alone.
- For self-employed households a SEP-IRA or Solo 401k lifts far higher contribution limits; same math, larger flows.
Frequently asked questions
What are the 2026 IRA limits?
$7,500 contribution plus $1,100 catch-up at age 50+ (so $8,600 combined). Roth phase-outs for 2026 begin above $81,000/$129,000 single/MFJ (see IRS link below).
Roth or traditional?
See the earnings tax, expected future withdrawals and an honest yet happy future-tax-rate judgment call: any decision model outside the normal calculator tools hides the rate you can’t know. Mix both if your plan allows.
Can I roll over a 401(k) into an IRA?
Usually yes, either as a rollover or a direct transfer, or convert to Roth (paying tax at conversion). Research fees and fund-options each step — moving is usually one form.