How it works
A Traditional IRA lets you deposit pre-tax dollars today, shielding both the principal and every dollar of investment earnings from income tax until you start taking money out in retirement. That deferral matters: reinvested dividends and capital gains stay inside the account rather than leaking out to the IRS each year, so the full balance keeps working. This calculator requires three inputs—your yearly deposit amount, an assumed annual percentage return, and the number of years until withdrawal—then reports the projected ending value. It does not model the upfront deduction you claim on your tax return, nor the income tax you will eventually owe on distributions; those sit outside the account and depend on your personal bracket.
The formula
Balance = Contribution × [((1 + r)^n − 1) / r]
Worked example
Suppose a 35-year-old opens a Traditional IRA and deposits the current IRS limit of $6,500 every year, planning to retire at 65. That gives a 30-year horizon. She expects a 6% average annual return.
r = 6% = 0.06
n = 30 years
Growth factor = (1 + 0.06)^30 − 1 = 5.7435
Annuity multiplier = 5.7435 / 0.06 = 95.7385
Ending balance = $6,500 × 95.7385 = $622,300
Over those three decades she has contributed $195,000 out of pocket.
Total deposited = $6,500 × 30 = $195,000
Investment earnings = $622,300 − $195,000 = $427,300
The $427,300 of accumulated earnings has never been taxed—and neither have the yearly dividends and realized gains that produced it. That is the core advantage of deferral: a larger pool of capital stays invested instead of being trimmed by taxes along the way.
The trade-off arrives at withdrawal. After age 59½, distributions from this balance are taxed as ordinary income. If her retirement tax rate is 22%, the first withdrawal triggers a tax bill.
Tax on a $40,000 withdrawal = $40,000 × 0.22 = $8,800
So the same $622,300 does not equal $622,300 of spendable cash; the IRS claims a portion of every distribution. The upfront deduction she claimed each contribution year offsets some of that cost, but the net benefit depends entirely on whether her working-age bracket was higher or lower than her retirement bracket.
Things to watch
| Factor | Effect on the projection |
|---|---|
| Return assumption | A 1% swing shifts the 30-year total by roughly $90,000 at this deposit level |
| Contribution limits | The IRS revises the cap yearly; over-funding triggers a 6% excise penalty |
| Deduction eligibility | High earners covered by a workplace plan may face reduced or zero deductibility |
| RMDs | Required Minimum Distributions begin at age 73, forcing taxable withdrawals whether you need the cash or not |
This tool produces an estimate, not professional tax or investment advice. Future tax laws, contribution caps, and market returns will all differ from the assumptions shown here.