For 2010 and 2011, the most that an individual can contribute to a traditional IRA or Roth IRA generally is the smaller of: $5,000 ($6,000 if the individual is age 50 or older), or the individual’s taxable compensation for the year. You have until your taxes are due (April 15th, 2011) to add to your IRA for 2010.
This is the most that can be contributed regardless of whether the contributions are to one or more traditional or Roth IRAs or whether all or part of the contributions are nondeductible. However, other factors may limit or eliminate the ability to contribute to an IRA as follows:
- An individual who is age 70½ or older cannot make regular contributions to a traditional IRA (just to make things complicated you can add to a Roth IRA) for the year.
Contributions to a Roth IRA are limited based on income. The limits are based on modified adjusted gross income (which is before deductions are taken). The Roth IRA earnings limits for 2010 are:
- Single filers: Up to $105,000; from $105,000 – $120,000 (a partial contribution is allowed)
- Joint filers: Up to $167,000; from $167,000 – $177,000 (a partial contribution)
For 2011 the earning limits increase to
- Single filers: Up to $105,000; from $107,000 – $122,000 (a partial contribution is allowed)
- Joint filers: Up to $167,000; from $169,000 – $179,000 (a partial contribution)
More details from the IRS website and earning limits details.
The income limits do not cap what you can add using a 401(k). So if you were planning on adding to a Roth IRA but cannot due to the income limits you may want to look into increasing your 401(k) contributions.
Related: Add to Your Roth IRA – Add to Your 401(k) and IRA – 401(k)s are a Great Way to Save for Retirement
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An important point with Roth IRAs is that they have to be funded with earned income, so if you want to max out your contribution of $5000 ($6000 if you’re 50 or older) you need to earn at least that much. That will be a complication if you’re over 70 and fully retired.
Still, having money rolled over into the account will be a great benefit. Not only are withdrawals tax free, but there are no required mimimum distributions kicking in at age 70.5 as is the case with every other retirement plan.
That means that the account can continue to grow–tax free–to be available for your later retirement years when you’re other accounts have been drawn down. With people living 20-30 or more years past retirement, that’s an important consideration.