Maximum Annual IRA Contribution Limits

By • on July 1, 2010 • Filed under: Plan Sponsors

We are asked frequently what the maximum contribution limits are for an IRA. This depends on the tax year in which the contribution is made. Whether you are making contributions to a Traditional IRA or a Roth IRA, the contribution may not exceed the maximum contribution limit or 100 percent of the taxable compensation for the person that is funding the IRA that year.

The chart below shows the tax year maximum annual contribution allowed.

Tax Year Maximum Annual Contribution
2002 – 2004 $3,000
2005 – 2007 $4,000
2008 – 2010 $5,000*

*Indexed for inflation in $500 increments beginning after 2008

For those that have reached the age of 50 before the close of the year the contribution was made, EGTRRA (Economic Growth Tax Relief Reconciliation Act) allows what’s called an IRA “catch-up” contribution. In the chart below we show the amounts allowed for the tax year maximum annual catch-up contribution:

Tax Year Maximum Annual Catch-up Contribution
2002 – 2005 $500
2006 and later $1000

For example, Paul who turns 50 on July 1, 2010 can contribute $5,000 to his IRA plus the catch-up contribution of $1000 making the total annual contribution $6000 for the tax year 2010.

If you contribute to both a Traditional IRA and a Roth IRA the maximum contribution limit for both must be combined. For example, if you are below age 50 and contribute $3000 to your traditional IRA the contribution to the Roth IRA may not exceed $2000.

If you have any questions in regards to opening an IRA or would like to contact us the please feel free to visit us at lowcost401k.com.

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