Traditional IRA Calculator

With a traditional IRA, you can deduct the money you put into the account from your income taxes if you qualify (more on that below). That allows you to sock away money for retirement and shield that money (both your contributions and the investment returns they earn) from taxes until you take withdrawals in retirement.

Deferring taxes makes it easier for you to save. For example, suppose you’re in the 24 percent tax bracket and you want to put $1,000 into your regular savings account. You’ll need to earn $1,316, because 24 percent, or $316, will go to income taxes. With a traditional IRA, you need to earn only $1,000 to contribute $1,000.

However, you will have to pay taxes on the money in your IRA when you withdraw it. 

Contributions to a Roth IRA are not deductible from your taxes, but if you follow the withdrawal rules, you won’t pay taxes on money you take out in retirement.
 

 The rules in a nutshell:

• You must be age 59½ or older.
• You must have held your account for at least five years.

Roth IRAs have one other advantage over traditional IRAs: You can withdraw from your principal — the money you have put into the account — at any time, without paying taxes or a penalty. (You will pay taxes and penalties if you withdraw from the investment earnings on your contributions before age 59½.)

The IRS sets annual contribution limits for IRAs. If you’re under age 50, you can contribute up to $7,000 a year to your traditional IRA in 2025. If you’re 50 or older, you can contribute an extra $1,000, for a total of $8,000.

There’s a catch, though, and it’s a big one. If you (or your spouse) have funds going into a retirement plan at work, such as a 401(k), your modified adjusted gross income (MAGI) must fall below certain limits to fully deduct your IRA contributions on your tax return. MAGI is your adjusted gross income, as reported on your 1040 or 1040-SR tax form, plus the value of certain deductions that you may have subtracted to calculate your adjusted gross income, such as student loan interest.

These are the income limits for deductible IRA contributions in the 2025 tax year if you or your spouse has a workplace plan available:

• Single tax filers with a MAGI up to $79,000 can make a fully tax-deductible contribution to a traditional IRA. Between $79,000 and $88,999, you get a partial deduction. At $89,000 and above, you can’t claim a deduction for your contributions.
• Married taxpayers who file a joint return must have $126,000 or less in MAGI to fully deduct contributions made by the spouse covered by a plan at work. This phases out for incomes up to $145,999; at $146,000 and up, you can’t take a deduction.

There’s no such phaseout for individuals who don’t have access to a workplace retirement plan — they can fully deduct IRA contributions regardless of their MAGI. (The caps on contribution amounts noted above still apply.) Married couples filing jointly with one spouse covered by a workplace retirement plan can deduct all IRA contributions made by the other spouse if their MAGI is $236,000 or less, or part of the contributions if their MAGI is between $236,000 and $246,000.

Of course, the more you contribute, the more you’ll have in retirement. The AARP Traditional IRA Calculator will show you how much you can earn by adding a bit more to your account each year.

Let’s say you’re single and, at 50, are just starting an IRA. You don’t want to contribute the maximum $8,000, but you can manage $1,000. When you hit 65, you’d have $26,888, assuming you earned an average 7 percent annual return. 

How could you do better? Try increasing contributions to the maximum allowable amount. Invest $8,000 a year and your nest egg will grow to $215,104 by age 65. Increase your contributions and work until 70, and you’ll have $350,921. The calculator allows you to experiment with different scenarios — higher contribution rates, higher returns, later retirement dates.

The tax code is designed to encourage savers to leave money in their IRAs until they are close to or in retirement. If you take money out before age 59½, you’ll typically owe a 10 percent penalty plus regular income taxes. After that, there’s no penalty, just normal taxes.

You can take early withdrawals penalty-free (but not tax-free) in certain circumstances set by the IRS, including (but not limited to): 

• Taking out up to $10,000 for the first-time purchase of a home.
• Taking out up to $1,000 for a personal or family emergency. You can do this once every three years unless you decide to treat the withdrawal as a loan and pay it back within three years.
• Taking out up to $5,000 for qualified expenses related to a birth or adoption.
• You become totally and permanently disabled.
• You are unemployed and using the withdrawal to pay for unreimbursed medical expenses or health insurance.  

There is also an exception for heirs, who can make penalty-free withdrawals after your death.

Starting at age 73, you must start taking at least a certain amount out of your traditional IRA every year. These mandatory withdrawals, called required minimum distributions (RMDs), are determined by the IRS using a formula based on your life expectancy and how much is in the account (or accounts). Roth IRAs are not subject to RMDs while the account owner is alive (heirs may have to take them).

Most financial institutions — banks, brokerages and insurance companies — offer IRAs. You don’t need $7,000 (or $8,000) to start one. Fidelity Investments, Merrill Edge and Charles Schwab, for example, all offer IRAs with no minimum investment.

As with all investments, keep an eye on the fees financial institutions charge to manage the account or the investments in an IRA. The more money you pay in fees, the less you can keep for yourself.