Traditional And Roth IRA Contribution Limits And Phase Outs

A couple of months back the IRS released their 2010 Traditional and Roth IRA contribution limits.   It’s important to keep an eye on those limits year to year if you’re contributing to one of these account types. As was expected the 2010 Traditional and Roth IRA contribution limits remain the same for the coming tax year.

2010 Traditional And Roth IRA Contribution Limits

The Traditional and Roth IRA contribution limits for the 2010 tax year are $5,000 for those under the age of  50.   If you’re over 50 you have the option of making catch up contributions to your account, which brings your limit to $6,000.

It’s important to remember that you can contribute to both a Roth IRA and a traditional IRA in the same year, but you can’t go over your limit ($5,000-$6000) when you combine the two accounts.  So if you were under 50, and contributed $2500 to a Roth IRA, you would only be able to contribute up to $2500 to your Traditional IRA.

Here’s a table showing the 2010 Traditional and Roth IRA contribution limits, along with the limits in years past.

Year	Age 49 and Below	Age 50 and Above
2002-2004	$3,000	$3,500
2005	$4,000	$4,500
2006-2007	$4,000	$5,000
2008-2012	$5,000	$6,000
2013-2018	$5,500	$6,500
2019-2022	$6,000	$7,000
2023	$6,500	$7,500

2010 Traditional And Roth IRA Phase Outs Based On AGI

Traditional and Roth IRAs have phase outs if you reach certain compensation limits. Single filers with an annual Modified Adjusted Gross Income (MAGI) over $105,000 begin to see their contribution limit drop until at $120,000 it goes away completely. The limits for Married Filing Jointly investors are $167,000-$176,000.

IRA Type	Single	Married Filing Jointly
Roth IRA	$105,000 – $120,000	$167,000 – $177,000
Traditional IRA	$55,000 – $65,000	$89,000 – $109,000

Contribute To Your Traditional Or Roth IRA Until April 15th

If you haven’t already contributed the full amount to your Traditional IRA or Roth IRA for the 2009 tax year, keep in mind that you can still open a Roth IRA and contribute to the accounts up until tax day, April 15th, 2010.  If you do make a contribution in 2010 before tax day, be sure to specify which tax year the contribution is being made for.

Differences Between Roth IRA And Traditional IRA Accounts

The main difference between Traditional IRA and Roth IRA accounts is how they are looked at for tax purposes.  Traditional IRA account contributions are made with pre-tax money.  Because of that your distributions will be taxed in retirement.  Roth IRA contributions, however, are made with dollars that have already been taxed.  Because of that the money will grow and not be taxed at withdrawal.   For a complete look at choosing between retirement accounts, check out this article:  Choosing Between 401k, Traditional IRA, Roth IRA.

Do you currently have a Traditional IRA or Roth IRA?  Are you contributing to the limit?  Which account type do you prefer?  Tell us your thoughts in the details.

Originally published at biblemoneymatters.com.