Roth IRA Calculator

Reviewed: December 16, 2014
By FinanceWeb

Roth IRA offers tax-free growth from contributions to these useful retirement arrangements. Roth accounts can supplement retirement income and add financial security for participants. A Roth IRA calculator is a great tool for maximizing the benefits of a Roth account; one can establish a program of contributions that will help meet goals, increase personal wealth and provide funds for retirement. The tax-free funds that accumulate from interest and compounding of the taxable Roth contributions can transform retirement. One can initiate a Roth IRA at any point in one’s career. By increasing retirement assets and spending, they improve financial flexibility and increase long-term security.

Using a Calculator for Planning

An IRA calculator is a valuable planning tool. It is helpful when envisioning goals and developing an investment and savings strategy to reach them. Investment is the key to a successful Roth IRA. Bank interest rates on savings and CDs are often lower than the average annual growth of major stock indexes such as the S&P 500 or gains calculated on the stock market as a whole. It is important to determine an accurate estimate of returns needed to meet long-term goals. One must factor in inflation and changes that may occur after retirement such as a more conservative investment approach to improve reliability and certainty of income streams. Roth calculators can assist in the overall view; for some participants, a conversion to Roth from traditional individual retirement arrangements might be more beneficial.

Roth IRA Eligibility

Roth IRA has eligibility requirements, and those with high incomes can be left out. The annual contribution limit for 2014 is $5,500.00. Those fifty or older may contribute an additional $1,000 as a catch-up exception. The income limits for married persons filing jointly is $181,000.00, for single individuals it is $114, 000.00. For those who are eligible, the Roth IRA adds another dimension to retirement planning. It is one that fits well with modern trends as many people prefer to a phased-in retirement by continuing to work either part-time, in a consulting status or in an unrelated line of business. The Roth IRA permits contributions past the usual retirement time and thus continues building assets or preserving other sources of income.

Maximum Contributions for Maximum Results

The key to maximum benefits is to make the entire annual contribution. The Roth IRA can go along with social security, a 401(k) plan, and savings to make a full effort towards financial security. One should take advantage of all available means to prepare for a secure retirement, and Roth IRA is a powerful tool for building personal wealth and tax-free retirement income. The Roth IRA does not have a mandatory start at a certain age; contributions can continue for life, and any unused portion can remain in the plan and go to the estate. Once one maintains a maximum level of the annual contribution, further growth comes from investment and compounding. The Roth IRA also permits withdrawal of principal at any time for specific reasons and more liberally after five years.

Roth Calculators and Market Estimates

The Roth IRA calculator can help determine the amount of investment income on will need to achieve financial goals. One can put an investment strategy in motion and review it annually or more often. As conditions change, one can make adjustments. Long-term goals might emphasize equity growth, and in a low bank interest environment, a substantial reliance on bonds. However, just as in retirement, income funds have a role in a balanced investment approach. They provide profits, and with them, added investment flexibility. The calculator can provide projections based on returns, savings rates, and market performance.