Roth IRA Calculator

How does Titan’s Roth IRA calculator work?

Titan’s Roth IRA calculator gives anyone the ability to project potential returns from a Roth IRA retirement account, based on your current age, how much you plan to contribute each year, the age at which you plan to retire, and the rate of return you expect. It also compares these returns to what you’d see if the money were invested in a standard taxable brokerage account.

Here’s how it works. You’ll complete the following fields:

• Annual contribution: Titan’s calculator defaults to $6,000, which is the maximum amount an eligible person can contribute to a Roth in a year. Not everyone is eligible to contribute this much—or to contribute at all. Read more about income limits for Roth IRAs below.

• Current age: This is how old you are today.

• Age you plan to retire: According to the IRS, the minimum retirement age is 59½— this is when you can begin withdrawing from your 401(k) without penalty. Many people target age 65 for retirement.

• Estimate Rate of Return: Rate of return (ROR) is the gain or loss for any investment, in percentage terms, for a given period of time. Titan’s calculator uses the historical average growth rates for U.S. stocks, using benchmark indexes such as the S&P 500 Index, which is about 10%. This rate is not adjusted for inflation.

The calculator will estimate the monthly payout from your Roth IRA in retirement. It will also estimate how much you’ll save in taxes, since earnings on funds invested in a Roth IRA are tax-free in retirement. The calculator assumes that your marginal tax rate is 25%.

Is a Roth IRA retirement account tax-free?

A Roth IRA is a retirement savings account that allows you to contribute money after you’ve paid tax on it, not before. While a Roth IRA doesn’t offer a tax deduction on contributions, all earnings are tax-free when they’re withdrawn in retirement. In this sense, Roth IRAs are partially tax-free.

What are the income limits in 2022 of a Roth IRA?

Eligibility to contribute to a Roth IRA is limited to those whose income falls below a certain threshold.

Here are the 2022 Roth IRA income limits using modified adjusted gross income:

• Single taxpayers: Less than $129,000 for maximum contribution

• Single taxpayers: Between $129,000 and $144,000 for a reduced contribution

• Married filing jointly: Less than $204,000 for maximum contribution

• Married filing jointly: Between $204,000 and $214,000 for a reduced contribution

Can I convert a Traditional IRA to a Roth IRA?

Taking a traditional IRA and converting it to a Roth is known as a “backdoor Roth IRA conversion”. This strategy allows high-income individuals to access a Roth IRA, which they normally wouldn’t be allowed to do because of income limits set by the IRS. This legal loophole enables high-earners to open a traditional IRA, make contributions, then immediately convert the account to a Roth IRA.

The backdoor Roth IRA process is complicated, though, and comes with tax implications. Several critical factors—income level, federal and state tax laws, and conversion rules—can help individual investors determine whether a backdoor Roth is a worthwhile option. Consider discussing backdoor Roth IRAs with a tax professional or financial advisor to help sift through the intricacies of a conversion and tax ramifications of this retirement investment strategy.

What is an alternative to a Roth IRA?

Traditional IRAs are tax-deferred retirement accounts that are available to everyone with earned income. They let investors contribute money toward retirement with pretax income, which means they don’t have to pay taxes on eligible contributions in the year they make them. So if they contribute, say, $1,000 in 2021, they can reduce their taxable income by that same amount when they file their federal tax returns for that year. The funds are subject to taxes when they take distributions from their account in retirement, when they’re at least 59½ years old.