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Traditional and Roth IRA Contribution Limits
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I know this is somewhat elementary stuff but I’ve been getting a lot of searchers looking for these contribution limits and they’re going to pages that don’t display it in a convenient and easily scannable format – thus, I’ve written this entirely new post to address these limits.
Contribution Limits:
| Year | Under 50 Limit | Over 50 Limit |
|---|---|---|
| 2006-2007 | $4,000 | $5,000 |
| 2008 | $5,000 | $6,000 |
| 2009 | $5,000 | $6,000 |
| 2010 | $5,000 | $6,000 |
Roth IRA Income Phase-out:
| Year | Floor | Ceiling |
|---|---|---|
| 2008 Single | $101,000 | $116,000 |
| 2008 Married F.J. | $159,000 | $169,000 |
| 2009 Single | $105,000 | $121,000 |
| 2009 Married F.J. | $166,000 | $176,000 |
| 2010 Single | $106,000 | $121,000 |
| 2010 Married F.J. | $167,000 | $177,000 |
Some rules:
- The Over 50 Limit takes into account a catch-up contribution you’re allowed to make if you turned 50 at any point during the year, so if you turned 50 on December 31st, then you’re allowed to contribute the Over 50 Limit. Your contribution is also limited by your income, you are permitted to contribute the lesser of your income or the limit (so if you made $500 in income, you’re only allowed to contribute $500 to your IRA).
- Traditional and Roth IRAs share the same limits, thus if you contribute $1,000 in 2008 to your Traditional IRA, you may only contribute an additional $3,000 to your Roth IRA (assuming you’re under 50).
- The Roth IRA income phase-out is linear, so if you are Married Filing Jointly, under 50, and your total income were $164,000 (2008), you are permitted to contribute $2,500 to your Roth IRA. There are two special cases though: 1) when calculating your limit, round up to the nearest $10; 2) If your limit is under $200 but still positive, round up to $200.
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One “2010 Trick” that people with incomes above the Roth Phaseout can do is to make nondeductible contributions to a Traditional IRA and roll them into a Roth IRA in 2010. If they only roll over the contributions, their rollover won’t be taxable, although if they roll over investment gains, that part of the rollover will be taxable. This is a way to “pre-fund” Roth IRAs and get around the phaseouts.
Disclaimer: check with a tax adviser for your own situation, etc.
Traditional IRAs and Roth IRAs share the same limit? I thought that they had their own limits since one is pre-tax and one is post-tax income…
foo, great comment… i knew about the 2010 “trick,” but didn’t know about the taxability of the investment gains…
Can you make the maximum contribution to a Roth IRA and a traditional IRA in the same year?
Foobarista: If you do the Traditional to Roth conversion, the amount you convert is subject to tax regardless of whether its a contribution or earnings – it’s only fair that way.
Blaine: No, they share the same limit of $4,000. It’s also shared by SEP-IRA employee contributions as well.
indio: Your maximum (Roth IRA contribution) + (Trad. IRA contribution) <= $4,000.
If it’s a NONdeductible traditional IRA contribution – meaning you’re funding a T-IRA with post-tax money – you don’t pay taxes on the contribution part when you roll it into a Roth in 2010. (If you had to, you’d be double-taxed on the contribution.)
This strategy is only interesting if you’re at an income level where you can’t make a deductible IRA contribution – or Roth contribution – anyway.
Question:
Do these limits apply if you do not have a compay sponsored 401k plan?
The 401k is independent of your IRA.
I believe your phase-out table is incorrect.
I’ve checked several sources, and they all indicate that for a single filer, the phase out range is $95K to $110K, not $115K.
Good catch Steven, you’re absolutely correct, thanks!
Is the amount you convert from a Traditional IRA to a Roth IRA counted as part of your allowed contribution for that year? e.g. if you convert $4k of an existing Traditional IRA to Roth IRA in 2007 does that mean you’ve reached your allowed contribution for 2007 or can you contribute another $4k to the Roth?
I don’t think the conversion counts as your contribution for that year.
What if you are in the phase out range of income AND over 50? Does the extra $1000 get tacked onto the limit or does the phase out limit override the catch-up?
The $1000 gets tacked onto the limit and the phase out still goes over that same span.
Great post. I’ve been looking for this income-limit info for months. But isn’t there an error in you third bullet? Shouldn’t that example pertain to someone over 50 limit is (50% * 5000); or only a $2000 limit for someone earning 161000 under 50 (50% * 4000)?
Re. 2010 rollover: I had read that you pay tax based on the % of your IRA assets that you are rolling over. And how does this apply if some of your IRA assets are already in a ROTH? And does this percentage apply to an individual’s assets or to a couple’s? Can you direct to an authoritative site or source? This is somewhat confusing.
I think your “phase-out” math in the example used is incorrect.
You used the 2007, Married filing jointly contribution of $2500 is income was $161k.
If it’s linear, wouldn’t that be a $2000 contribution?
161k – 156k = 5k, which is halfway through the phase out, thus half of the contribution (of $4k) would be allowed: $2000, not $2500.
You guys are right, I did the math for the Over 50 instead of under 50 Limits, Thanks!
I think I just read that your IRA contributions are also limited by your income, such that, for 2006, and you’re under 50, you can only contribute up to the lesser of $4000 and your income for 2006 (MIN[$4k,Income]). Is that right? If so, If you had no income for 2006, can you convert $4000 from a Traditional IRA to a ROTH IRA, treat that as income, and thus additionally contribute the maximum $4000 to your IRA?
Thanks
P.S. nice anti spam trick
If an individual has zero income for a given year, can he still make a full Roth IRA contribution?
Help! How do I calculate the phase-out? If I made 106k last year but contributed the full 4k, how do I know how much to pull out?
It’s linear, so you’re 73.3% into the phase out so you can contribute only 26.7% of the usual $4,000 annual limit, which is $1066.67. Next, you just round up to the nearest $10, so you can contribute $1070 towards your Roth IRA last year. Please consult with a tax professional, that number is just my interpretation of the rules and may not be correct, a tax professional will be able to give you a definitive answer.
If you made the contribution after the 1/1/2007, you can just send a letter to your brokerage and ask them to reclassify the excess to this year. If you think you’re going to be over again this year, then you have to figure out how to withdraw it. Again, consult a tax professional please before making any decisions.
I have a Traditional IRA that I want to convert to a Roth and if I do it before April 15, which AGI limits do I need to follow 2006 or 2007. The conversion will be taxable in 2007, right?
Hello, there are a lot of middle income Americans who can only contribute to a nondeductible IRA. If they can roll this money into a Roth IRA and use it tax free in retirement or in their estate planning, it is a perfect opportunity if they are not taxed when they roll the nondeductible IRA into the Roth without being taxed.
Does anyone know that for certain? SR
SandyRice & Foobarista:
When you rollover a non-deductible IRA to a Roth IRA a portion will be non-taxable and the other portion is ordinary income. For example, you have $10,000 in your non-deductible IRA which consists of $4000 in contributions and $6000 in investment growth. If you convert the whole account to a Roth then you incur $6,000 ordinary income. If you only convert $4,000 of the account (or 40%) then you will incur $2,400 ordinary income. You cannot designate that $4,000 rollover as your contributions and say that the rollover is tax free.
Can I contribute to my 401k AND a Roth IRA in the same year? (our income is below 150K-married) Joe
I have $3200 nondeductiable T-IRA, total $4000 T-IRA. My T-IRA income at the end of 2007 is $4700. I converted $4000 T-IRA to Roth IRA in 2007. Can I still contribute another $4000 into R-IRA? Thanks.
I understand that if I now put in the full amount (non-deductable) in a 2008 Roth IRA ($6000 as am over 50), but it turns out by the end of the year I have earned within the phase-out band or over the maximum ceiling for investing in a Roth IRA, I will need to recharacterize. What is the downside for gambling I will be able to make the Roth IRA investment as opposed to a Traditional IRA; that is, what is the penalty – lost income, interest, penalty, etc. – of needing to recharacterize?
Just to verify what I am reading. Regardless of how much income we make in 2008 (lets exaggerate and say $300,000 MAGI) both my husband and I (both 50 years old in 2008) can make a $6,000 non-deductible contribution each to our traditional IRAs for 2008. Then in 2010 we can convert the momey to a Roth?
Cathie – According to the law as it exists today, that is correct to the best of my knowledge.
If you fund a simple IRA at $5000 and later in the year realize you can now fund it at $6000 because you turned 50 that year, can you put an additional $1000 in at ANOTHER institution (i.e, JP Morgan Chase IRA for the $5000 and Citibank IRA for the $1000 catch up). OR do you have to put the additional $1000 at the same institution (JP Morgan Chase in this example).
Does a 403B contribution, or 401K contribution in 2008 have any effect on what I can contribute to a Roth IRA ?
They do not share the same contribution limits. They do affect one another in that when you contribute to a retirement account, your gross income is lowered and you could potentially contribute more to a Roth IRA if you’re in the income phase out region.
I usually try to fund my Roth IRA at the beginning of each year based on the latest tax return filed. My income tax return had me below the phase-out limit in 2006, but near the end of 2007 I had a promotion and increase. As it was the end of 2007, not much change to 2007 AGI, but 2008 reflects the entire year’s income change and puts me over the phase-out limit.
Because I fund the IRA in January, the previous year’s tax return is not yet filed so I use the year’s before to check the income (with assumed increases) against phase-out limits.
If I did contribute to 2008 in January, based on 2006 Tax Return + assumed increase, and I am over the limit for 2008, what do I need to do?
Which the IRA(Roth or Traditional) that I should fund first if married filed jointly with AGI around $159,000 in 2008? I guess Roth. Am I right? What if I can contribute $4000 to Roth IRA after taking phase out into consideration, can I contribute the remaining $1000 to a traditional IRA for 2008 so that my total IRA contribution for 2008 is below the $5000 limit?
I made a Roth IRA contribution and now I find out I’m above the AGI limit to contribute. Can I withdraw the contribution as if it never happened and put the money somewhere else?
You can withdraw it but you may pay a penalty, call your broker to find out how to remedy this.
By 2010
we had no earned income in 2008, and are converting $100k of traditional IRAs to Roth IRAs. we originally thought that the entiure $100k would be claimed as taxable income.
but some of the original IRA contributions were not deductible (they were post-tax)- can you point me to a table of maximum contributions that goes back to the beginning of IRAs? if we can separate the nature of the contributions then we should only have to claim income of the pretax contributions and 100% of the gains – correct?
I can only find maximum contributions back to 2002, but need many earlier years.
hope you can help.
For those asking, your total contribution to ALL IRA accounts cannot exceed the limits imposed by the IRS. If your limit is $5000, you can split it among your IRA accounts, but you can’t exceed $5000 total even if you have several accounts. There are penalties for contributing too much to your IRA accounts, so it’s not advisable unless you think your contributions can outperform the amount of penalty you’ll pay.
@Anonymous – In regard to an excess Roth IRA contribution (your income rose above the threshold after you contributed), you need to get a “Distribution Request Form” from the IRA custodian (broker) who hosts your account. Fill out the form and return it to your broker. They should refund you the full amount of your original contribution. Save a copy of the form for your tax records.
Excess Roth IRA contributions incur a 6% annual penalty until the excess contribution is removed. However, the IRS does give you a decent time window in which to rectify the situation. As long as you fix things in a timely manner, you should be fine. Just make sure you document your excess contribution withdrawal.
Under this setup, why would any married double-income couple want to file jointly?
I contributed to both a Simple and to a Roth in 2006. I over contributed by $3400. I just realized this today! In IRS Pub 590, the Traditional IRA section, it sounds like I can apply the excess to “later years”. Does this mean I can call the mutual fund company and ask them to reapply the $3400, split between 2009 and 2010? Does this mean I avoid the 6% excise penalty?
Kim
In 2009 I rolled over $2200 from my bus driver pension account into my traditional IRA account. I also contributed 2800 cash into the account. Question: Can I still contribute $2200 into the account for tax year 2009 OR does my bus driver pension rollover count against the $5000 limit ?
I realize that if I were to contribute to both a Roth IRA and a traditional IRA, the total contribution can’t exceed $5000 (under 50). But my MAGI is in the phaseout range for the Roth… so my question is, can I still contribute $5000 total, or just up to the phaseout limit? Thanks!
Hello
I am single mother of 2 and make less than 30K a year. What IRA is best for me.
my only income this year is from traditional IRA distribution, which i understand is taxable income. i now have some unexpected cash (flow) but no income, can i contribute to my ira and have that deduction (in effect to offset the distribution which is taxable income)?