VisualCalc’s IRA Comparison Calculator compares investment growth in three alternative types of IRA's: a) a Deductible (or Traditional) IRA; b) a Nondeductible IRA; and c) a Roth IRA.
A deductible IRA (also called a traditional IRA) allows you to deduct your contributions on your tax return. Contributions to a nondeductible IRA, on the other hand, are not deductible on your tax return (i.e., you are investing after-tax dollars). While a deductible IRA is a better option, not everyone qualifies for one. Eligibility is determined by a number of factors, including your income, filing status, social security status, and access to an employer-sponsored retirement plan.
A Roth IRA is similar to a nondeductible IRA in that contributions are made with after-tax dollars, but the key difference is what happens to your money after you make contributions. With a nondeductible IRA, your money compounds tax-free as long as you leave it in the account. However, once you withdraw your money, your gains are taxed at ordinary income rates. With the Roth IRA, on the other hand, you pay no taxes on your gains when you withdraw your money.
VisualCalc’s IRA Comparison Calculator allows you to compare how much money you might withdraw from each of these options: a deductible IRA, a nondeductible IRA and a Roth IRA, assuming the same contribution to each for the same amount of time.
