Calculators for IRA Eligibility and Comparison

With tax rates heading up for many baby boomers and with 2010 presenting an opportunity for Roth IRA conversion, funding an IRA in 2008 and 2009 can be an important retirement planning strategy.

IRA funding limits for 2009 have been set for various scenarios and you should consider all of them.

I find it helpful to use online calculators to: (a) help determine whether a taxpayer is eligible for a traditional, Roth, Roth-conversion, and/or non-deductible IRA; and (b) help compare the relative financial benefits of each different IRA type.  I have found two online IRA calculators that I like in particular.

First, Wells Fargo has an IRA Eligibility Calculator that is simple to use.  After entering your age, your spouse’s age, you adjusted gross income, your filing status, and whether you participate in a retirement plan at work, it displays a list of the IRA types and indicates whether you are eligible to fund each type.  The eligibility display also contains links to two additional calculators.  One calculator allows you to compare the after-tax benefits of a Roth vs. a traditional IRA.  The second calculator provides feedback on the financial benefits of doing a Roth-conversion, taking into account your marginal tax rate, expected return, and anticipated distribution period.

Morningstar also has an IRA Calculator in three different forms to help you make better decisions about funding or converting an IRA.  The three calculators determine the following:

• Eligibility contribution limits for a Roth or Traditional IRA
• Compare scenarios to find out which type of IRA is best for you
• Conversion – to find out whether it makes sense to convert a traditional IRA to a Roth IRA

Give these a try and let me know what you think.  Also, if you know of any other IRA calculators that you think work well, please tell us about it in a comment.

Image credit:  Dani Simmonds

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