IRAs

IRA Future Value Illustration

These charts compare after-tax values for a Roth vs. a traditional IRA based on the assumptions that follow.

Current IRA balance:	$0	Estimated annual rate of return:	7%
Annual contribution:	$7,000	Estimated income tax before retirement:	24%
Years until retirement:	30	Estimated income tax at retirement:	22%

Result at retirement: Value of Roth IRA: $661,226. After-tax value of traditional IRA plus taxable account: $633,705.

Assumptions:

The same annual contribution is made at the end of each year until retirement. Earnings are compounded annually.

This illustration assumes that all traditional IRA contributions are fully tax deductible. However, note that if either the IRA owner or the IRA owner's spouse participates in an employer-sponsored retirement plan, the deductibility of contributions is subject to limitations based on tax filing status and modified adjusted gross income. This illustration assumes that an amount equal to the tax deduction each year is invested in a taxable account.

Withdrawals from traditional IRAs are subject to federal income tax to the extent that they consist of deductible contributions and investment earnings. Withdrawals made before age 59½ may also be subject to a 10% penalty.

Contributions to a Roth IRA are not tax deductible. Depending on an individual's tax filing status and modified adjusted gross income, allowable contributions to a Roth IRA may be limited.

Qualified distributions from a Roth IRA are not subject to federal income tax. Nonqualified withdrawals of earnings before age 59½ may be subject to income tax and a 10% penalty.

Note: This is a hypothetical example and is not intended to reflect the actual performance of any specific investment, nor is it an estimate or guarantee of future value. Investment fees and expenses, which are generally different for taxable and tax-deferred investments, have not been deducted. If they had been, the results would have been lower. The lower maximum tax rates on capital gains and qualified dividends, as well as the tax treatment of investment losses, would make the taxable investment more favorable than is shown in this chart. When making an investment decision, investors should consider their personal investment horizons and income tax brackets, both current and anticipated, as these may further impact the results of this comparison. All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.