What is the Best Roth IRA Calculator? - District Capital Management
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What is the Best Roth IRA Calculator?

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Do you want to know how much you can contribute to a Roth IRA this year? A Roth IRA calculator is an easy way to find out how much you can contribute. The main benefit of contributing to a Roth is you will be able to grow your investments tax-free. However, if you deposit money into your Roth IRA while no longer being eligible (or more than the allowable amount), the IRS may charge you a 6% penalty.

This is where Roth IRA calculators come in. It can be an easy way to know how much you can contribute to a Roth.


Where can I find good online Roth IRA calculators?

I googled the term “Roth IRA calculator 2021,” and the top three search results that appeared were calculators by Bankrate, Nerdwallet and Thrivent . Let’s look closely at each.

 1) Bankrate’s Roth IRA Calculator

It sent me to a page where I was able to enter the following assumptions:

  • $0 starting balance (better late than never)
  • Annual contributions: $5,500 (and increasing future contributions to the maximum allowed; it would not allow me to put $6,000, which is the current max allowed)
  • Current age: 33
  • Age of retirement: 65
  • Expected rate of return: 6% (stocks have historically returned around 10% per year, but we believe given the current stock market valuations, a 6% return is more reasonable for an aggressive portfolio)
  • Marginal tax rate: 25% (assuming post-2025 tax bracket)

What does Bankrate’s Roth contribution calculator tell us? It tells us that if we contribute yearly based on the above assumptions, the Roth IRA projection would be that our money could be worth over $550,000 at age 65. That’s the power of compounding.

And that it generates a tax savings of close to $140,000. That’s the power of a Roth IRA.

Bankrate Roth IRA Calculator

But wait, this calculator did not really help us determine if we are eligible for a Roth! Let’s go to the next one.

2) Nerdwallet’s Roth IRA Calculator

It’s asked me a bunch of questions. But this time, it also asked me about my gross income. I inputted $130,000. And it gave me this:

Nerdwallet Roth IRA Calculator

According to this calculator, given a gross salary of $130,000, I can only contribute $2,800 to a Roth IRA. This is what we are looking for! It’s below the maximum possible contribution of $6,000 in 2020 because the 130k salary is already in the phase-out range.

(Spoiler Alert: After double-checking, Nerdwallet’s results are not accurate!!)

Let’s see what Thrivent’s calculator comes up with.

3) Thrivent Roth IRA Calculator

Weird. It looks exactly like the Bankrate’s Roth contribution calculator.

Thrivent Roth IRA Calculator
The only difference is it wouldn’t allow me to enter $5,500 for my annual contribution (so I can compare with Bankrate’s results). Anyway, this is also not what we’re looking for.

 

Which Roth IRA Calculator is Best?

The Nerdwallet’s calculator was pretty straightforward to use, in determining how much we can contribute to a Roth given a gross salary.

However, I personally like Fidelity’s Roth IRA Calculator.

It looks like this:
Fidelity's Roth IRA Calculator

After I clicked on Get Results, it gave me this:

Fidelity's Roth IRA Calculator Results

This is also what we’re looking for. The nice thing about this calculator is it asks the tax year the contribution is being made for, which gives a more precise calculation. For example, if you put in the 2021 Roth IRA calculation it will give you a more accurate result for this year.

DISCOVERY: Notice that Fidelity’s calculator is telling us that we’re eligible to contribute $3,600, while Nerdwallet’s only said $2,800. I tend to trust Fidelity’s Roth IRA Contribution Calculator more because it asked me for the specific tax year I was contributing towards. It’s very possible that Nerdwallet’s Roth IRA calculator is not updated. Meaning it’s likely assuming a maximum allowable contribution that is less than $6,000.

 

Final Word on the Roth IRA account calculator:

Based on this exercise, I’m coming away with this main lesson: You can’t fully trust a quick Google Search! As we saw, two of top three IRA Calculators did not give us what we are looking for. And the one that seemingly did, gave us the wrong number!

Also, make yourself aware of the 3 common mistakes people make with Roth IRAs and learn about Roth IRA Hack that you might find useful.

Best Financial Planner Washington DC

Alvin Carlos, CFP®, CFA is an investment advisor and fee-only financial planner, in Washington, D.C that works with clients across the country. He has a Master’s degree in International Relations from SAIS-Johns Hopkins. Alvin is a partner of District Capital, a financial planning firm designed to help 30s and 40s professionals achieve their financial goals through smart investing, reducing taxes, retirement planning, and maximizing their money. Schedule a free discovery call to learn how we can help elevate your finances.

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District Capital is an independent, fee-only financial planning firm. We help professionals and entrepreneurs in their 30s and 40s elevate their finances and maximize their money. We are based in Washington, D.C and we work with people virtually nationwide.

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