Traditional IRA Calculator,
tax-deferred to retirement.

Field guide

How a Traditional IRA actually works.

An Individual Retirement Account (IRA) is a tax-advantaged savings vehicle created by Congress to encourage long-term retirement saving. The Traditional IRA is the original version, dating to 1974. It operates on a simple three-part deal: you deduct contributions from your taxable income today, the money grows without being taxed each year, and you pay ordinary income tax only when you make withdrawals in retirement.

The tax-deferred compounding engine

The single most powerful feature of any tax-deferred account is the elimination of the annual tax drag that erodes returns in a regular brokerage account. In a taxable account, dividends and realized gains are taxed every year, reducing the amount available to compound. Inside a Traditional IRA, every dollar of interest, dividends, and capital gains stays in the account and keeps compounding at full strength until you withdraw.

Over 30 years at a 7% annual return, this difference is enormous. A $10,000 investment in a taxable account at a 25% tax rate on annual returns effectively earns only 5.25% per year after taxes — reaching roughly $44,400. The same $10,000 inside a Traditional IRA earns the full 7%, reaching roughly $76,100 before the eventual withdrawal tax. That pre-tax difference represents the compounding power of deferral.

The formula this calculator uses

The balance is compounded monthly using the standard future-value formula:

where rmonthly = (1 + rannual/100)^(1/12) − 1. Monthly compounding is used because most IRA investments (mutual funds, ETFs) credit dividends and reinvest monthly. The after-tax withdrawal value is:

This models the fact that every dollar withdrawn from a Traditional IRA is treated as ordinary income and taxed at your marginal rate in the year of withdrawal.

The upfront tax deduction

If you (or your spouse) are not covered by an employer-sponsored retirement plan, Traditional IRA contributions are fully tax-deductible regardless of income. If you are covered by a workplace plan, deductibility phases out above certain Modified Adjusted Gross Income (MAGI) thresholds — in 2026, the phase-out range is $81,000–$91,000 for single filers and $129,000–$149,000 for married filing jointly (when the contributing spouse is the one covered by the workplace plan).

The deduction savings shown in this calculator assume the full deduction is available, using a simple formula:

This represents the aggregate tax you avoid paying over the contribution period, at your current marginal rate. It is the “free money” the IRS effectively contributes to your IRA on your behalf, real purchasing power you retain today.

Traditional vs. Roth IRA: which wins?

This is the most-asked question in retirement planning. The canonical answer from financial theory is clean: Traditional wins when your retirement tax rate is lower than your current rate; Roth wins when it is the same or higher.

The math behind this: with a Traditional IRA you contribute pre-tax, and the government’s share comes out at the end (at your retirement rate). With a Roth you contribute post-tax, and the government’s share comes out at the beginning (at your current rate). If both rates are equal the two accounts are mathematically identical after taxes. The only real question is: will you be in a lower, same, or higher tax bracket in retirement?

• Traditional is likely better if you expect to drop to a lower bracket in retirement — common for people near peak earning years (forties, fifties) who will have more modest income from RMDs and Social Security.
• Roth is likely better if you are early in your career, currently in a low bracket, expect significant income growth, or believe tax rates will rise materially by the time you retire.
• A mix of both is the most common advice from financial planners — maintaining both a Traditional and Roth IRA gives you “tax diversification”: the ability to draw from whichever bucket carries a lower marginal cost in any given retirement year.

2026 contribution limits

The IRS adjusts contribution limits for inflation. For 2026:

• $7,500 per year for individuals under age 50.
• $8,600 per year for individuals aged 50 and older ($7,500 base plus a $1,100 “catch-up contribution” — a concept introduced by EGTRRA in 2001, though the catch-up amount itself increased for 2026, from $1,000 the year before).

You can contribute to both a Traditional IRA and a Roth IRA in the same year, but your combined contributions across all IRAs cannot exceed the annual limit. Spousal IRAs allow a non-working spouse to contribute up to the same limit, provided the household has sufficient earned income.

Required Minimum Distributions (RMDs)

Unlike a Roth IRA, a Traditional IRA does not let your money grow indefinitely tax-deferred. The IRS requires you to start taking minimum withdrawals, called Required Minimum Distributions — once you reach a certain age. Under the SECURE 2.0 Act (signed December 2022), the RMD start age was raised to 73 for anyone who turns 72 after December 31, 2022, and will rise further to 75 for anyone born in 1960 or later.

Your first RMD must be taken by April 1 of the year after you reach the applicable RMD age. Every subsequent RMD must be taken by December 31. Missing an RMD used to trigger a 50% excise tax on the shortfall; SECURE 2.0 reduced that penalty to 25% (and 10% if corrected promptly).

The RMD amount is calculated each year by dividing your December 31 account balance by a life expectancy factor from the IRS Uniform Lifetime Table. The factor decreases each year as life expectancy shortens, so RMD amounts gradually increase as a percentage of your balance over time.

Early withdrawal penalties

Withdrawals taken before age 59½ from a Traditional IRA are subject to a 10% early withdrawal penalty on top of the ordinary income tax owed. This makes a Traditional IRA an inefficient emergency fund — the combined penalty and tax can consume 30–50% of any early distribution at middle-income tax rates.

The IRS provides a list of exceptions that waive the 10% penalty without waiving the income tax, including first-home purchase (up to $10,000 lifetime), qualified higher education expenses, substantially equal periodic payments (SEPP / Rule 72(t)), and disability.

Worked example

Age 30, current balance $5,000, contributing $7,500/year, 7% annual return, 22% current bracket, 22% retirement bracket:

• Years of growth: 35 (to age 65)
• Total contributions (new money only): $262,500
• Pre-tax balance at 65: roughly $1,123,000
• After-tax (at 22%): roughly $876,000
• Deduction savings over 35 years: roughly $57,750 (= $262.5k × 22%)

Because both rates are equal here, a Roth IRA would produce the same after-tax result, but the Traditional IRA put $57,750 back in your pocket over the contribution period that you could spend or invest elsewhere.

Disclaimer

This calculator is for educational purposes only and does not constitute tax, legal, or financial advice. Contribution limits, deductibility rules, RMD amounts, and penalty exceptions change regularly. Consult a qualified financial planner or tax professional before making IRA decisions.