Individual Retirement Accounts (IRA) 101
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Guides IRA 101
The annual IRA contribution limit is $5,500 for people under 50, and there are additional restrictions that will impact some savers. Still, IRAs have a lot to offer many savers.
IRA contribution limit for 2018
Saving too much for retirement is an unlikely problem — unless you run afoul of contribution limits for individual retirement accounts. The limits for Roth IRA and traditional IRA contributions haven’t changed over the last several years. The current combined annual limit is:
- Under age 50: $5,500
- Age 50 or older: $6,500
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).
Here’s the full breakdown of those limits and phaseouts, which are based on your modified adjusted gross income in 2018:
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. First, you can’t contribute more than you earn. If your taxable compensation for the year is $4,000, that’s also your IRA contribution limit.
The caveat to that caveat: 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, and you’re both under 50, your spouse will need to earn at least $11,000 (to cover the $5,500 annual maximum for each of you).
The limit also doesn’t apply to transfers from other retirement accounts, like a 401(k) rollover.