What Are IRA Contribution Limits?

IRA Contribution Limits

When the IRS recently released the traditional and Roth IRA contribution limits for 2010, I thought to myself – I’d better keep an eye on these limits every year as I contribute to a Roth IRA account.

Not unexpectedly, the IRA contribution limits for 2010 are the same as those of 2009, but that is not always the case, so make sure you stay on top of it.

What is relevant for 2010 IRA contribution limits?

We need to discuss this basic point first. For 2010, traditional and Roth IRA contribution limits are $5000 if you are under 50. If you are over 50 years old, you can make catch-up contributions of an additional $1000 to your IRA account, raising the limit to $6000.

You have to remember that you may make both Roth IRA and traditional IRA contributions in the same year, but your combined contribution for both accounts cannot exceed $5000, or $6000 if you’re over 50. This means if you are under 50 years old and have already contributed $3000 to your Roth IRA, then you can contribute up to $2000 to your traditional IRA.

When should you make your IRA or Roth IRA contributions?

You can make your traditional or Roth IRA contribution until April 15, 2010, for the 2009 tax year. If you haven’t done it yet, there’s still time to open a Roth IRA and contribute before April 15, 2010. Don’t forget to specify which for which tax year you are making the contribution.

Exploring IRA contribution limits

Now let me take you through the two types of IRA contributions we just talked about – traditional and Roth IRA. If you are using an IRA savings plan as part of your retirement planning, the contribution limits for 2009 and 2010 are welcome news, since the allowable IRA contributions vary each year. Take a look at the following table and notice how limits have changed over the years:

Year Age 49 and below Age 50 and above
2002-2004 $3000 $3500
2005 $4000 $4500
2006-2007 $4000 $5000
2008 $5000 $6000
2009 $5000 $6000
2010 $5000 $6000

The contribution limit for an IRA used to be $2000. Thanks to inflation, the limits have been raised to meet the needs of retirement plans, as the table above clearly shows.

IRA contribution for 2009 and 2010 

Traditional IRA and Roth IRA contribution limits for 2009 and 2010 are $5000. If you turned 50 before December 2009, you are eligible for a catch-up contribution of $1000, taking your total contribution to either $5000 or $6000 at the end of 2009. So what about the income limits for 2009 and 2010?

The adjusted gross income, or AGI, contribution limits were raised in 2009. If you actively participated in an employer retirement plan, your tax-deductible traditional IRA contribution is phased out if you are:

  • Married and filing jointly with AGI from $89,000 to $109,000
  • A single head of household, with AGI from $55,000 to $66,000
  • Married and filing separately, with AGI under $10,000

What about Roth IRA contributions for 2009 and 2010?

I think the best feature of a Roth IRA is that you can contribute at any age as long as you receive earned income and have a non-working spouse. Roth IRA contribution rules related 2009 are:

  • Single filers with a modified AGI up to $105,000 can make a full contribution
  • If AGI is more than $120,000, a single filer cannot make a Roth IRA contribution
  • Joint filers with modified AGI up to $166,000 can make a full contribution. If your AGI is more than $176,000, then you cannot make a contribution to a Roth IRA.

In 2010, the following income limit rules apply to Roth IRA contributions:

  • Single filers with modified AGI up to $105,000 can make a full contribution.  If your AGI is above $120,000, then you cannot make a Roth IRA contribution.
  • Joint filers with modified AGI up to $167,000 can make a full contribution. If your AGI is over $177,000, you cannot make a Roth IRA contribution

Whichever IRA you choose, there are annual contribution limits. The IRA contribution limits will probably rise in increments of $500 based on inflation.

Here's a tip - you don't have to deposit $5000 or $6000 as a lump sum in your IRA account.

Your contributions can be spread over the year to add up to the limit.

Try to make the maximum contribution each year, and take advantage of the tax benefits.

Like it or not, the years until your retirement are getting shorter, and contributing now will give you a head start!


Return from IRA Contribution Limits to Individual Retirement Account


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