The results below, and on the following page, show the projected value of a traditional IRA vs. a Roth IRA, based on your estimates on the input page as well as the taxes that would be owed in each case. On the “Future value of assets used to pay taxes upon conversion less taxes (of earnings only)” line, it is assumed that this money would be invested separately in a taxable account. Based on this estimate, which type of IRA would be most beneficial to you?

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Based on the information you entered, the graph below illustrates the value of the two types of accounts once you reach retirement age. Note that this illustration assumes that upon retirement you would begin withdrawing money from both accounts. However, one other feature of the Roth IRA you should be aware of is that you don’t have to begin taking withdrawals from the account until you want to, whereas with a traditional IRA, you must begin taking minimum withdrawals from the account by April 1 of the year after the year in which you reach age 72 or you will be subject to tax penalties.

Estimated Value of a Roth IRA vs. a Traditional IRA

The information provided is not specific investment advice, a guarantee of performance, or a recommendation. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return also involve a higher degree of risk. These calculations assume that all deposits made to your traditional IRA were deductible, and that withdrawals were taxed at the after-retirement tax rate you selected. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years and the distribution must take place after age 59½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime limit). To the extent that they exceed total contributions, non-qualified distributions are subject to a 10 percent federal tax penalty and are includible in gross income. Withdrawals from a traditional IRA before age 59½ may be subject to a 10 percent federal income tax penalty, and income taxes will be due. For advice concerning your specific situation, consult a tax professional.

Your Results

You can see below, and on the following pages, the types of IRAs you are eligible to make contributions to. If your income exceeds certain levels, you may qualify for a partial deduction (or no deduction) on your contribution to a traditional IRA, or you may be ineligible or only partially eligible for a Roth IRA. If that is the case, you can still consider making nondeductible contributions to a traditional IRA.

Your Results (continued)

Your Results (continued)

Are you eligible for more than one type of IRA account? If so, you may need to choose which account is appropriate for you. In some cases, you may have more than one type of IRA account. You should be aware that no matter how many different IRA accounts you have, your total contributions to all IRAs in a single year may not exceed $6,000. In addition, individuals aged 50 and older may make an additional $1,000 “catch-up” contribution, bringing the total contribution limit to $7,000. This calculator assumes maximum contributions, including “catch-up” contributions for those age 50 and older.

The chart below illustrates the differences in after-tax income for Roth, deductible, and nondeductible IRAs using the values you entered.

Estimated Total After-Tax Income from Different IRAs

The information provided is not specific investment advice, a guarantee of performance,
or a recommendation. Rates of return will vary over time, particularly for long
term investments. Investments offering the potential for higher rates of return
also involve a higher degree of risk.

Note that withdrawals from deductible and nondeductible traditional IRAs are subject
to ordinary income taxes and if withdrawn prior to age 59&frac12 may be subject to
an additional 10 percent federal income tax penalty (for nondeductible traditional
IRAs, only the portion of the withdrawal attributable to earnings is taxable). To
qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must
be in place for at least five tax years and the distribution must take place after
age 59&frac12 or due to death, disability, or a first-time home purchase (up to a $10,000
lifetime limit). To the extent that they exceed total contributions, non-qualified
distributions are subject to a 10 percent federal income tax penalty and are includable
in gross income.

The results below show the hypothetical values of a taxable investment vs. a tax-deferred
investment, and the hypothetical value of the tax-deferred investment after taxes
are paid. The growth of the tax-deferred investment exceeds that of the taxable
investment because you keep more of your money working for you. If you increase
the number of years you plan to save, you’ll see that the longer your time frame,
the greater the difference becomes.

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The chart below illustrates the difference tax-deferred accumulation can make. The
highest line on the chart shows the tax-deferred amount accumulated assuming the values you entered. The middle line on the chart demonstrates the tax-deferred amount accumulated after taxes have been paid according to the tax rate you selected. The lowest line on the chart shows the amount accumulated assuming the same values, but with earnings taxed annually.

If you are investing for long-term goals, such as retirement, you may want to consider
tax-deferred alternatives. We can help you sort through the various investment options
to determine what may be appropriate for your situation.

Advantage of Tax-Deferred Accumulation

The information
provided is not specific investment advice, a guarantee of performance, or a recommendation.
Typically withdrawals from tax-deferred investments are taxed as ordinary
income and any withdrawals taken prior to age 59½ may be subject to an additional
10 percent federal tax penalty. A plan of continuous or systematic investing does
not ensure a profit and does not protect against loss in declining markets. Certain
tax-deferred investments include mortality and expense charges, sales charges,
and administrative fees which would reduce the performance shown if they were accounted
for. Lower maximum tax rates for capital gains and dividends, as well as the tax treatment of investment losses, could make the investment return for the taxable investment more favorable, thereby reducing the difference in performance between the accounts shown. One’s timeframe and income tax brackets, both current and anticipated, should be considered when making financial decisions.
Rates of return will vary over time, particularly for long-term investments. Investments
offering the potential for higher rates of return also involve a higher degree of
risk.

Your Results

Based on your estimates, you could owe the amount of federal income tax shown below.

Is the amount greater than you expected? You may be able to help reduce your tax
liability by contributing more to your employer-sponsored retirement plan or by
increasing your itemized deductions. For example, you may want to increase your
charitable contributions or pre-pay deductible expenses such as state taxes.

This is only an estimate of your total taxes. A tax refund or taxes still owed would depend
on withholdings, estimated taxes paid, eligible tax credits, and other factors not considered
here. This is not to be construed as a final determination of your federal tax liability;
a tax professional should be consulted. Alternative minimum tax and itemized deductions are
not considered.

Are you comfortable with the amount you are paying in taxes? There are steps you can take to
help reduce your annual tax burden. Review your individual situation and develop a strategy
to help reduce your taxable income.

Where Your Annual Income Goes

This is only an estimate of your total taxes. A tax refund or taxes still owed would depend
on withholdings, estimated taxes paid, eligible tax credits, and other factors not considered
here. This is not to be construed as a final determination of your federal tax liability;
a tax professional should be consulted. Alternative minimum tax and itemized deductions are
not considered.