As you plan for retirement, it's important to consider how much money you will need to support yourself after you stop working. One way to save for retirement is by contributing to an Individual Retirement Account (IRA). While 2022 is long gone, taxpayers still have a valuable opportunity to save on their 2022 income taxes by contributing to a traditional IRA before the tax deadline in April.
If you're new to saving for retirement or just want to learn more about IRAs, it's important to understand some of the common retirement-related terms. For example, full retirement age is the age when you can start receiving full Social Security benefits. You may also need to calculate how much retirement income you will need from your savings, 401(k), Social Security benefits, and other sources to ensure financial security.
To estimate your potential earnings from an IRA, you can use an IRA calculator. This tool allows you to enter information about your current savings, expected contributions, and other factors to determine how much your nest egg will grow by the time you reach retirement.
For example, NerdWallet offers a compound interest calculator that can help you determine how much your money can grow with compound interest. This can be a useful tool to estimate how much you could save by investing in stocks or other assets that generate compound interest.
When using an IRA calculator, it's important to keep in mind that there are limits to how much you can contribute to an IRA each year. For 2022, the contribution limit is $6,000 for individuals under age 50 and $7,000 for those age 50 and older.
If you have investments, it's also important to understand how they may impact your taxes. While filers with investments had to get most of their tax situation sorted before the prior calendar year ended, they still have areas to consider. For example, you may need to pay taxes on any capital gains from the sale of investments.
The time of year you choose to retire can also have a big impact on your retirement income and the taxes you owe. For example, if you retire in a year when you have a high income, you may owe more taxes on your Social Security benefits.
To get a better sense of your retirement income and tax situation, you may want to consult with a financial advisor. They can help you create a retirement plan that takes into account your unique circumstances and goals.
In conclusion, an IRA calculator can be a valuable tool to help you plan for retirement and estimate your potential earnings. By understanding common retirement-related terms and contributing to an IRA, you can take steps to ensure financial security in your golden years.