Traditional IRA Growth Calculator

What Is a Traditional IRA?

An Individual Retirement Account (IRA) is a tax-advantaged savings account designed for retirement. A Traditional IRA provides a potential tax deduction on contributions today, grows tax-deferred (no capital gains or dividend taxes while invested), and withdrawals in retirement are taxed as ordinary income.

Contribution Limits

The 2025 figures were $7,000 a year under 50, and $8,000 from age 50 (the extra $1,000 is a “catch-up” contribution). These are indexed to inflation and rise in most years, so check the current limit before you max out.

Income limits for deductibility: if you or your spouse are covered by a workplace retirement plan, the deduction phases out over an income band. Without a workplace plan, anyone can deduct the full contribution regardless of income. Note that this affects the deduction, not the contribution: you can still put the money in, it just is not deductible, which is the basis of the Backdoor Roth below.

Traditional IRA vs Roth IRA

The core difference is when you pay taxes:

Traditional IRA:

• Contribute pre-tax dollars (deductible) → lower taxable income today
• Investments grow tax-deferred
• Withdrawals in retirement are taxed as ordinary income
• Required Minimum Distributions (RMDs) begin at age 73

Roth IRA:

• Contribute after-tax dollars (no deduction) → no immediate tax benefit
• Investments grow completely tax-free
• Qualified withdrawals in retirement are 100% tax-free
• No RMDs during the account holder’s lifetime

Which Is Better, Traditional or Roth?

It comes down to one comparison: your tax rate now against your tax rate in retirement.

• Expect a lower bracket in retirement → Traditional wins. You skip the tax at today’s high rate and pay it later at the low one.
• Expect a higher bracket → Roth wins. Pay at today’s low rate and never pay again.
• Rates equal → the two produce mathematically identical after-tax results. Roth still tends to win on the tiebreakers: no required minimum distributions, and no exposure to whatever Congress does to tax rates in the intervening decades.

The arithmetic behind that last point surprises people. A single $7,000 contribution to a Traditional IRA at 7% for 30 years grows to $53,286, or $41,563 after 22% tax at withdrawal. Go the Roth route instead and you pay the 22% first, so only $5,460 actually goes in, growing to $41,563. Identical to the cent. Deferring the tax and prepaying it are the same trade whenever the rate does not move.

One thing this calculator deliberately leaves out of the comparison: money already sitting in an IRA. That balance grows the same way regardless of what you do next, so including it only obscures the decision, which is about where the next contribution goes.

Required Minimum Distributions (RMDs)

Starting at age 73, the IRS requires you to withdraw a minimum amount from Traditional IRAs each year. The withdrawal amount is calculated using your account balance and a life expectancy factor from IRS tables. Failure to take the RMD results in a 25% penalty on the amount not withdrawn.

The Backdoor Roth

High earners who exceed the Roth IRA income limits can contribute to a Traditional IRA (non-deductible) and then convert it to a Roth. This is the “Backdoor Roth”, and it is legal and routine, but the pro-rata rule makes it messy if you already hold pre-tax IRA money. Take advice before trying it.

Growth Formula

Traditional IRA: FV = current_balance × (1+r)^n + annual_contribution × [(1+r)^n - 1] / r. After-tax value at retirement = FV × (1 - retirement_tax_rate). The tax deduction saves: contribution × current_tax_rate per year.