When it comes to retirement planning, the more you know, the more informed decisions you’ll be able to make. If you have an IRA retirement account, then it can be beneficial to understand how and why you should use IRA calculators.
What is an IRA Calculator?
If you’ve never used this type of calculator before, you may just be amazed at how beneficial it can be to your retirement planning. This type of calculator can be easily used to help evaluate and compare different types of IRA accounts and their tax savings. Instead of having to sit down and do all of the math to determine account balances, tax payments, and so forth, you can easily input numbers into an online calculator that will shoot out specific data based on your entries.
Compare IRA Types
According to the experts at SoFi, “A traditional IRA (individual retirement account) is a retirement account that you can open and fund yourself.” While traditional accounts are still the most common IRA accounts used, there are many other types out there to choose from. These include SEP, SIMPLE, and Roth IRAs. Using this calculator can allow you to assess the differences between using each type of IRA account. This can help you to determine if one type is going to be more beneficial to your retirement savings than another.
Better Understand How Taxes Affect Your Total IRA Amount
Another great benefit of using an IRA calculator is that it can help you visibly see how taxes affect your IRA account. For example, traditional IRA accounts are funded with pre-tax dollars, while Roth IRA accounts are funded with post-tax dollars. Both accounts will grow differently over time, and this type of calculator can allow you to compare the difference in the amount and what you’ll owe, if any, in taxes when you go to withdraw money during retirement.
Determine How Much to Contribute
One of the biggest questions that you’re going to have about your IRA account is how much you should be contributing each paycheck. This calculator can allow you to input different contribution amounts so that you can foresee what your total account balance will be at a specified time in the future. This will help to ensure that you’re contributing enough money so that you’ll have adequate savings for your retirement years when you’re going to be relying on your IRA disbursements.
Know Your Total Contribution Limits
Using one of these calculators can also assist you in determining what your maximum contribution limit is for each year. It’s important to realize that the IRS has varying contribution limits depending on a number of factors, such as your age. You should be very mindful of this limit as it will help you to determine what your regular paycheck contribution amount will be.
If you have an IRA or are considering setting one up, you’ll definitely need to utilize an IRA calculator. This will help you to determine your contribution amounts and what you can expect to have in your account when you retire.