IRA Contribution Limit

For a long time the contribution limit on an IRA stood at $2,000. Finally, policymakers realized that it was time to keep up with inflation, and have expanded these limits. To discuss exactly what these limits are, we first need to define what type of IRA that you have. There are three types of IRAs that we need to look at.

The first type is the traditional IRA. In 2009 the contribution limit was $5,000. If you turned 50 during the calendar year, then you were allowed to a "catch-up" contribution of $1,000. That brings your limit up to $6,000 if you were older than 50 during 2009. There are other parameters. In 2009, the adjusted gross income or AGI contribution limits for traditional IRAs were raised. If you are covered by retirement plan at work, then your tax-deductible contribution to a traditional IRA is phased-out under the following circumstances.

Your filing status is married filing separate returns your deductible phase out starts at under $10,000.

Your filing status is married filing jointly and your AGI is more than $89,000 but less than $109,000.

Your filing status is single, head of household and your AGI is more than $55,000 but less than $66,000.

In 2010 these rules remained the same as far as traditional IRAs are concerned.

The next type of IRA is the simple IRA. The contribution limits on those were also changed in 2009. In 2009, the employer salary-reduction contribution that applies to Simple IRAs was raised to $11,500. For workers that are age 50 and older, your employer can make additional "catch up" contributions of $2,500, bringing the total contribution limit in 2009 for Simple IRAs to $14,000. In 2010, the employer salary reduction contribution remained at $11,500, keeping the total contribution limit at $14,000.

Next, we move on to the Roth IRA. One of the great things about the Roth IRA is that a person can contribute at any age as long as they have some sort of income and a non-working spouse. There are a couple of rules as far as income limits are concerned on a Roth. They have to do with filing single and filing jointly. Single filers with modified adjusted gross income up to $105,000 can make a full contribution. If your adjusted gross income is in excess of $120,000, then you cannot make a contribution to a Roth IRA. Joint filers with modified adjusted gross income up to $167,000 can make a full contribution. If your adjusted gross income is in excess of $177,000, then you cannot make a contribution to a Roth IRA.

The contribution limit for a Roth IRA remains at $5,000. As with the others you are allowed a $1,000 "catch up" contribution if you are over the age of 50. This brings the contribution limit for people over 50 to $6,000.