In 2008 and 2009, if you are 50 or older, you can make an additional "catch-up" contribution of $1000. In order to qualify for the "catch-up" contribution, you must turn 50 by the end of the year in which you are making the contribution.

It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.

In 2009, for single tax filers with an employer sponsored retirement plan, an IRA contribution is fully tax-deductible if your income is below $55,000. It is then prorated between $55,000 and $65,000. If your income is over $65,000 and you have an employer sponsored retirement plan, such as a 401(k), you receive no tax deduction. For married couples, the same rules apply except the deduction is phased out between $89,000 and $109,000.

This calculator automatically determines if your tax deduction is limited by your income. However, there are two unusual situations not automatically accounted for where additional tax phase-outs are applied. First, if your spouse has an employer sponsored retirement plan but you do not, your tax deduction is phased out from $166,000 to $176,000. Second, if you are married filing separately and have an employer sponsored retirement plan, the income phase-out is from $0 to $10,000.

In addition, all earnings in your taxable account are assumed to be taxable in the year they are earned.