2016 Roth IRA Calculator

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How To Use The 2016 Roth IRA Calculator

Simply fill out the fields in the 2015 Roth IRA calculator featured above, using a value for each of the following items:

• Starting Balance
• Annual Contribution
• Expected Rate of Return
• Inflation Rate
• Current Year, and
• Year You Plan To Retire

Not sure what these terms mean? Not sure what numbers to put in?

Use the section below as a guide for your 2016 Roth IRA calculations.

Then, as you fill in each field with numbers customized to your situation, the calculator will automatically update to reveal your projected inflation-adjusted balance at retirement.

2016 Roth IRA Calculator Terms

Below is an explanation of each calculator term:

Starting Balance
This is the current balance in your Roth IRA (if you already have one). If you're still considering opening a Roth IRA, put zero in this field (since you don't have an existing balance).

Need an example?

Let's say, you already have $25,000 in your Roth IRA.

If so, then put $25,000 in the "Starting Balance" field.

Annual Contribution
This is the amount you plan to contribute to your Roth IRA on an annual basis.

For example, let's say you plan to contribute $250 per month to your Roth IRA. If so, then put $3,000 in the "Annual Contribution" field.

The default for this field is set to $5,500 because that's the maximum contribution if you're under age 50.

However, the maximum contribution is $6,500 for people age 50 and older. So if you're 50 or older and plan to make the maximum contribution, put $6,500 in the "Annual Contribution" field.

If you're married, and both you and your spouse intend to make the maximum contribution, then input the appropriate amount in this field.

For example, if both you and your spouse are over age 50 and eligible to contribute the maximum amount, then put $13,000 in the "Annual Contribution" field.

Expected Rate of Return
This is the annual compound rate of return you anticipate receiving on your Roth IRA savings. This will vary from person to person based investing strategy, fees, types of investments, and other factors.

However, since most people invest their Roth IRA savings in stocks, the default is set to 10.85% - the annual compound rate of return on the S&P 500 from 1959 to 2003.

If you expect a higher or lower rate of return, adjust accordingly.

Inflation Rate
This is the annual rate of inflation you project for the timeframe in which your Roth IRA savings is invested.

It's important that you don't underestimate the rate of inflation since it will eat away at the purchasing power of your savings over time.

The default rate is set at 4.1% - the approximate annual rate of inflation over the past seven decades.

However, if you're more conservative, you might want to use a higher rate of inflation.

Current Year
This is fairly self-explanatory. It's 2016!

Seriously, though, you might want to consider a future year for this field if you're not yet investing in your Roth IRA but plan to do so in the future.

Year You Plan To Retire
This is the year in which you'd like to retire, and while you'd probably like to make this the same as the current year, that may not be realistic... (although I hope I'm wrong!)

Make sure you put a realistic year in this field in order to get the most accurate calculation of your inflation-adjusted Roth IRA savings at retirement.

Balance At Retirement
This is the projected inflation-adjusted value of your Roth IRA when you retire.

The 2016 Roth IRA calculator automatically updates this value when you fill in the aforementioned fields.

Unlike some Roth IRA calculators, this value represents your savings in terms of today's dollars - meaning a million dollar nest egg will retain the equivalent purchasing power of a million dollars today.

Calculating Your Retirement Plans

Understanding the impact of inflation on your retirement savings is essential in creating a savings plan which will provide you with the money you need in your golden years.

While this Roth IRA calculator provides you with a ballpark estimate of your inflation-adjusted Roth IRA savings, it's important to remember it's only an estimate.

After all, estimates are only as good as their underlying assumptions.

So do lot's of research. Refine your plan and make it better by asking tough questions, such as...

What happens if you get a lower than expected rate of return?

What happens if inflation is higher than you expected?

And how will working an extra year or two impact the value of your Roth IRA?

Explore all possible scenarios, and you'll be much more likely to achieve your retirement savings goals.

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