IRA contribution limits are important factors in retirement planning, but they can change every year and have a few notable features.
2020 IRA contribution limits
In 2020, the annual contribution limit for Roth IRAs and traditional IRAs is:
Under age 50: $6,000.
Age 50 or older: $7,000.
IRA income and deduction limits
Both traditional and Roth IRAs also impose restrictions in certain circumstances:
Roth IRA contribution limits: The amount you can contribute is reduced — and eventually eliminated — at higher incomes.
Traditional IRA deduction limits: You can always contribute the full amount, but your ability to deduct contributions may be reduced or eliminated if you or your spouse has a 401(k) or other retirement plan at work and contributions were made for the plan year (this includes employer contributions). No matter what your income, your deduction is allowed in full if neither you or your spouse are covered by a retirement plan at work.
Here’s the full breakdown of those income limits in 2020 for traditional IRAs and Roth IRAs, which are based on your modified adjusted gross income. MAGI is adjusted gross income with some deductions and exclusions added back in. (For instructions on figuring your MAGI, see IRS Publication 590-A, Worksheet 1-1 for traditional IRAs and Worksheet 2-1 for Roth IRAs.)
Traditional IRA income limits in 2020
Note: Traditional IRA income limits apply only if you (or your spouse) have a retirement account at work.
Roth IRA income limits in 2020
Exceptions to IRA contribution limits
This is the IRS, so you’re probably not surprised to hear there are a couple caveats you should know about.
You generally can’t contribute more than you earn. If your taxable compensation for the year is $4,000, that’s also your IRA contribution limit.
If you’re a nonworking spouse, you can have what’s called a spousal IRA as long as your spouse earns enough to cover the contribution. That means if you both want to contribute the maximum to an IRA for 2020, and you’re both under 50, your spouse will need to earn at least $12,000 (to cover the $6,000 annual maximum for each of you).
The limit also doesn’t apply to transfers from other retirement accounts, such as those used to create a rollover IRA. You should also note the deadline for IRA contributions for any given tax year is tax day — typically around April 15 — of the following calendar year.
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