Individual Retirement Accounts (IRAs) are a combination of different types of savings and investments for retirement. They commonly include stocks, bonds, exchange-traded funds, mutual funds, and cash deposits.

The most common IRAs include traditional and Roth IRA. There are no deductions available for contributions made to a Roth IRA account. You can, however, claim a deduction for contributions made to a traditional IRA.

If you are planning to invest in a Roth IRA, here are some factors you must consider.

• The contribution limit will vary depending on your age during application
• Current income will determine eligibility as there are certain limits for single and joint filers of income tax
• The earnings must not exceed $135,000 for a single tax filer, $199,000 for a joint filer, or $10000 partial contribution to be eligible for a Roth IRA
• Finally, the filing status that classifies applicants who are single, married and filing jointly, married and filing separately, and any applicant who is the head of the household

Benefits of Roth IRA

• Investing in a Roth IRA is highly beneficial from the taxation viewpoint
• Roth IRA may not allow deductions for the contributions made, but you can still invest up to $5,500 annually in addition to what you have in your 401(k) balance
• Applicants who are 50 years or older can contribute an additional $1,000 annually
• There is no distribution limit for a Roth IRA; moreover, you can pass on the money to your heirs without many restrictions
• You can avoid tax rate fluctuations as the contributions made to a Roth IRA are locked in at the current tax rate and not the rate that will be applicable at the time of retirement
• It is possible to withdraw any contribution made to a Roth IRA tax-free; however, the tax can be levied on withdrawals of the earnings over the course of investment
• Federal taxes will not be applicable after the qualified age of fifty-nine and a half on the contributions while the distribution of earning might be subject to taxes

What is a Roth IRA calculator?
A Roth IRA calculator is an online assistance tool that will estimate the money that you will need to retire and secure financial future. You must first and foremost figure out how much annual contribution is possible after meeting all your financial obligations for the year.

Your retirement age and the rate of return on investment will determine the monthly return accordingly. The estimation can be then adjusted accordingly in the Roth IRA calculator software to predict the minimum contribution amount.

One of the main functions of the Roth IRA calculator is to show the value of an investment that is tax-free in comparison to the original taxable amount. The rate of return is very important to calculate the monthly contribution and tax savings with respect to the said amount.

Effectively using a Roth IRA calculator
You must understand certain financial and tax implications before finding the best IRA providers in the market. Here are a few tips that will enable you to use a Roth IRA calculator to get results that can be deemed prudent for an investment in the long run.

Consider your expenses
The contributions from your Roth IRA must be sufficient to tide you over after retirement. The only way to estimate accurately is to consider your current expenditure and determine a reasonable rate of return on the investment.

Inflation and associated factors
A contingency rate for inflation must be set by default in the calculator to make sure you don’t fall short of money when there is a financial crisis.

Additional income
You must also factor in your salary hike from time to time and include the amount while recalculating your contribution to a Roth IRA.

Roth IRA conversion
A Roth IRA conversion allows you to transfer assets from a traditional IRA, 401(k), 403(b), or even a government 457 plan into a Roth IRA. There are certain Roth IRA income limits applicable to the different type of assets and the amount can be estimated using a conversion calculator.

The calculator mainly considers your current combined value of all non-Roth IRAs and nondeductible contributions to the traditional IRA. You can either take the full amount or a certain percentage for conversion.

Similar to a that of a Roth IRA calculator, the conversion also considers additional factors like your filing status, current taxable income excluding the conversion amount, the estimated federal income tax rate, and the rate of return depending on the risk profile.

Merrill Edge, E-Trade, Ally Invest, TD Ameritrade, Charles Schwab, Interactive Brokers, Fidelity, Vanguard, Scottrade, and Wealthfront are among some of the popular Roth IRA account providers with online calculators and resources to help you estimate your retirement savings.