How this instrument works
An IRA is opened by an individual directly with a bank or brokerage — nobody at a payroll department sets it up, matches it, or caps a contribution rate against your salary the way a 401(k) or 403(b) plan does. Anyone with earned income can open one: a freelancer with no workplace plan at all, a W-2 employee who already maxed out a 401(k) and wants one more sheltered bucket, or someone between jobs parking an old 401(k) balance through a rollover. Because there's no employer in the arithmetic, this formula carries no match term — the entire deposit stream is whatever the saver alone chooses to put in, up to the legal ceiling.
That ceiling is the one number the IRS controls directly: a flat $7,000 a year for 2024, regardless of what Annual contribution, $ is set to. The instrument applies min(contribution, $7,000) before anything compounds, shown as Contribution after the annual IRS limit ($7,000) — type $15,000 into the contribution field and the sheet still only compounds $7,000 of it. That clamp is the structural feature separating this instrument from a 401(k) or 403(b) projection: those plans cap contributions at a percentage of salary or a five-figure elective-deferral limit, so a six-figure earner can shovel tens of thousands a year in; an IRA caps that same person at $7,000 no matter how much they earn, which makes the assumed return fight a much smaller, fixed-size deposit stream.
Three things sit outside the arithmetic on purpose. The sheet doesn't distinguish a Traditional IRA (deductible now, taxed on withdrawal) from a Roth IRA (taxed now, generally tax-free later) — Projected IRA balance at retirement is pre-tax growth either way, and which account keeps more of that number after taxes depends on rules this formula doesn't model. It also skips the extra $1,000 catch-up contribution allowed at age 50 and older, and it never checks whether the saver has enough earned income, or sits under the income ceiling Roth eligibility phases out at, to legally make the contribution being typed in.
- Enter what's already saved under Current IRA balance, $.
- Set Annual contribution, $ to what you plan to add this year — the sheet caps it at the IRS limit automatically.
- Set Assumed annual return, % and Years until retirement to the horizon you're projecting.
- Read Contribution after the annual IRS limit ($7,000) to see the capped figure the projection actually uses.
- Read Projected IRA balance at retirement for what the capped contribution plus starting balance grow into.
Worked example — maxing the $7,000 cap for 25 years
Take Current IRA balance, $ at 20,000, Annual contribution, $ at 7,000 — right at the limit — Assumed annual return, % at 7, and Years until retirement at 25. Contribution after the annual IRS limit ($7,000) reads exactly $7,000, since nothing above the ceiling was typed in to begin with. Feed those figures through FV = B(1+g)^t + capped·((1+g)^t − 1) ⁄ g and Projected IRA balance at retirement comes to $551,291.92.
Split that figure into its two pieces and each is checkable on its own: the starting $20,000 alone compounds to $108,548.65 over 25 years at 7 percent, the same lump-sum arithmetic any compound-interest sheet would return; the remaining $442,743.26 comes entirely from 25 years of the capped $7,000 deposit compounding through the annuity term — the same number Projected IRA balance at retirement would show if this account had started from a zero balance. Four out of every five dollars in this particular balance came from the deposits, not the money the account opened with, because the deposit stream — not the return rate — is what a $7,000 ceiling holds back the most for anyone who could otherwise save more per year.
Questions
What happens if I enter more than $7,000 in Annual contribution, $?
Contribution after the annual IRS limit ($7,000) stops rising at $7,000 no matter how high Annual contribution, $ is set — type $10,000 and the field still reads $7,000, and Projected IRA balance at retirement comes out identical to entering $7,000 exactly. The extra dollars simply aren't allowed into an IRA that year; a saver who wants that money working too would need a separate, uncapped taxable brokerage account, which this sheet doesn't model.
Why is there no employer match field, unlike a 401(k) calculator?
Because an IRA isn't sponsored by an employer at all. It's opened directly by an individual — a freelancer, a gig worker, someone rolling over an old 401(k), or a W-2 employee who already maxed a workplace plan — at a bank or brokerage of their own choosing, so there's no payroll match to add. Every dollar in Projected IRA balance at retirement came from the saver alone, up to the $7,000 cap.
Does this calculator distinguish a Traditional IRA from a Roth IRA?
No — the compounding arithmetic is identical either way. What differs is tax treatment: Traditional contributions can lower taxable income now and are taxed on withdrawal, while Roth contributions are taxed now and generally come out tax-free later, subject to income limits on eligibility. Projected IRA balance at retirement shows pre-tax growth only; which account keeps more of that figure after taxes is a separate question.
Does the $7,000 limit ever change, and what about catch-up contributions?
The IRS periodically raises the limit in $500 increments as inflation warrants — $7,000 is the figure used here for 2024. Savers 50 and older are also allowed an extra $1,000 catch-up contribution on top of the standard limit, but this sheet's clamp is fixed at $7,000 regardless of age, so anyone eligible for the catch-up should treat Projected IRA balance at retirement as a slight underestimate.
Why does an IRA projection grow so much more slowly than a 401(k) projection with similar inputs?
Because the deposit stream is capped at a flat $7,000 a year here, versus a 401(k) elective-deferral limit several times larger plus any employer match on top. For a saver who could afford to put away more, the IRA's contribution cap — not the assumed return — is usually the binding constraint on how large Projected IRA balance at retirement can get.
Does the calculator check whether I'm actually eligible to contribute?
No. Contributing to an IRA legally requires earned income at least equal to the amount contributed, and Roth IRA eligibility phases out above certain income levels set by the IRS. This sheet only applies the dollar cap shown in Contribution after the annual IRS limit ($7,000) — it doesn't verify income, filing status, or eligibility before compounding whatever figure is entered.
References
- IRS — Retirement topics: IRA contribution limits
- Consumer Financial Protection Bureau — Planning for retirement
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.