Frequently asked questions
How does a Traditional IRA differ from a Roth IRA?
Traditional IRA contributions may be tax-deductible now, but withdrawals in retirement are taxed as ordinary income. Roth IRA contributions are after-tax, but withdrawals are completely tax-free. Traditional wins when your retirement tax rate is significantly lower; Roth wins when rates are the same or higher in retirement.
What tax rate should I enter for retirement?
Estimate based on your expected retirement income from all sources (IRA withdrawals, Social Security, pension, other income). Most retirees have lower income and thus lower marginal rates, but mandatory withdrawals (RMDs) starting at 73 can push you into higher brackets if your balance is large.
Are all IRA contributions tax-deductible?
Deductibility depends on your income and whether you have an employer plan. If neither you nor your spouse has a workplace retirement plan, contributions are fully deductible regardless of income. Otherwise, deductibility phases out above certain income thresholds. Check IRS guidelines for current limits.
What are Required Minimum Distributions (RMDs)?
Starting at age 73, you must withdraw a minimum amount from Traditional IRAs each year. The amount is your balance divided by an IRS life expectancy factor. Missing an RMD incurs a 25% penalty on the amount not withdrawn. Use our RMD calculator to estimate your required withdrawal.
Can I contribute to both a Traditional and Roth IRA?
Yes, but the combined annual limit applies to both. You can split contributions between them however you want, up to the total limit ($7,000 in recent years, $8,000 if 50+). Splitting is a common strategy for tax diversification in retirement.
Is this calculator applicable outside the US?
The Traditional IRA is a US-specific account type. However, many countries have equivalent tax-deferred retirement accounts: the UK has SIPPs and workplace pensions, Canada has RRSPs, Australia has superannuation, and India has NPS/PPF. The same principle applies: deduct now, pay tax later.