Roth IRA Contribution Limit

The Roth IRA was established in 1997.  The main purpose was to help ordinary people save for retirement.  Funds contributed to a Roth IRA must come from a salary and not from other income such as investment funds.  This was done to keep rich people and trust fund kids from taking advantage of the tax breaks. 

The contribution limit was initially set at $2,000 per year when the Roth was established. In 2002 the limit was raised to $3,000 annually, and if you were over 50 you could contribute $3500.  In 2005 the limit was raised again. This time it was raised to $4,000 with and an extra $500 allowed if you were over 50 bringing the total for the over 50 crowd to $4500.  In 2006 they allowed the over 50 bunch to have another increase bringing their limit to $5,000.  In 2008, the limit was raised again, but this time it was raised for all age groups.  The limit was raised to $5,000 for individuals and $6,000 for folks over 50.

Contribution limits are examined each year and sometimes increases are granted and sometimes they aren’t.  Make sure that you understand the current tax laws and contribution limits before making a choice on IRAs.