subject: The Amount Of Contribution You Can Put In Your Roth Ira [print this page] The best way to build up your retirement savings is, of course, to make regular contributions to your Roth IRA account. However, these contributions are guided by IRA rules. Current contribution limits are pre-set according to these rules, and they are often altered to new ones each year. It is a common advice from financial planners and adviser to make as much contributions as you possibly can by going for the maximum contribution limit. This will ensure the speedy build up of your retirement funds, which means more tax-free money comes time to retire.
The main reason for the annual variation in contribution limits is the provision for reflected increase in the cost of living and the inflation. It is of utmost necessity that you be aware of the current contribution limits when you open your account. The corresponding amount can help you determine the maximum amount that you can put in each month to optimize your contributions and avail of the gains linked to the account.
For the year 2009, the contribution limit for your account is $5,000, provided you have a source of earned income and below 50 years of age. For as long as you have earned income, you are qualified to continue contributing $5,000 per year. An additional amount of $1,000 is allowed for those who are over the age of 50 bringing the annual contribution to $6,000. The additional amount is deemed a 'catch-up' contribution and, to reiterate, strictly applicable only if you are older than 50.
The $5,000 contribution limit is based on the modified adjusted gross income amount of less than $166,000 for married couples who file jointly; for married couples who file jointly with modified adjusted gross income of at least $166,000 but not exceeding $176,000, the amount of contribution is appropriately reduced. For single filers, a modified adjusted gross income of at least $105,000 but less than $120,000 will allow the $5,000 contribution limit. If the modified adjusted gross income exceeds the identified income brackets in both cases, you will enter a phase out period where you will not be allowed to make any contributions to Roth IRA for the period. Any raise or decrease in your income may determine the current amount you may be allowed to contribute.
The other factor that could affect your Roth IRA contribution limit besides the income restrictions, is the contribution amount you maintain with other retirement plan accounts. If you also have traditional IRA, for instance, the contributions you make to that account can off-set the allowable contributions to your Roth IRA. Consult with your accountant or financial advisor if you have other existing IRA types. 401k and 403b plans will not make any impact or difference to your Roth IRA limits. Meaning, if you have an employer-sponsored plan in place, you will still be allowed to go for the maximum annual contribution limit of $5,000 to your retirement account each year.
