As you plan your retirement years, it’s essential to decide how you’ll save the money necessary to support yourself in your golden years. An individual retirement account (IRA) is one of the most popular ways to save toward your financial goals, and it comes with tax advantages that can help boost your bottom line. To find the right IRA, you need to compare the various calculators out there, and this guide will show you how to do just that so you can choose the best IRA for your needs and achieve your financial goals.
How IRA Calculators Work
- The calculator asks you questions about your financial situation, such as how much money you make, your tax rate, when you plan to retire, etc.
- The calculator uses these answers to determine how much money will be taxed in each scenario.
- The calculator then tells you how much money you can put into a Roth IRA, how much money you can put into a traditional IRA, or both.
If you’re eligible for a Roth IRA, it’s best to put as much money into that account as possible. This is because all withdrawals from a Roth IRA are tax-free. If you’re not eligible for a Roth IRA, it’s best to put as much money into a traditional IRA as possible.
Roth vs. Traditional IRA
The main difference between a traditional IRA and a Roth IRA is when you pay taxes. According to experts at SoFi, “In a traditional IRA, contributions are made with pretax money, which means that any withdrawals from a traditional IRA will be taxed as income when you make them.”
Making A Choice Between Two Good Options
A Roth IRA calculator can be an excellent tool for comparing a traditional IRA vs. a Roth IRA. You simply plug in numbers such as your annual income, the number of years until retirement, and more into an online calculator. Many online calculators will do all of these things automatically by asking you questions in easy-to-follow steps. You immediately know how much more tax-free income (and money) you could have if you choose one type of IRA over another.
Comparing Products
With so many IRA calculators out there, it can be hard to know which one is best for you. To make an informed decision, you’ll want to do your research. Find out about each product’s reputation, look at reviews online (try searching with different keywords), read up on its ease of use, and find out if it provides other benefits such as personal financial planning advice or access to financial advisors.
How Do You Choose Between Multiple Calculators?
Don’t worry; you’re not alone. When looking at IRA calculators, most people find that they need multiple options because so many factors go into your final decision. It can be hard to find a calculator that accommodates every option you want, especially if you don’t know all those options. So don’t let yourself get overwhelmed by all of those numbers.
Choosing an IRA for retirement savings can be a difficult decision. The best way to decide is to know what you’re working with.
