The IRS recently announced the contribution limits for those funding an Individual Retirement Account during 2011 – and they’re the same as the 2010 limits.
So, whether you have a regular IRA or a Roth, you’re allowed to contribute $5,000 to the account next year. If you’re 50 or older, you can take advantage of the “catch up” provision, and put an extra $1,000 in your IRA.
What about Income Limits?
If you’re considering a Roth IRA, you may be wondering whether the income limits will change in 2011. Those limits have also been announced, and they’re slightly higher than this year’s. Here’s a summary:
For Singles
If you’re single, you can contribute up to the annual limit, as long as your Modified Adjusted Gross Income (MAGI) is less than $107,000 per year. If you earn more than $107,000 but less than $122,000, the amount you’re allowed to contribute is reduced, based on your exact income. And, if you earn more than $122,000, you’re ineligible to contribute to a Roth.
For Married Couples Filing Jointly
If you’re married filing jointly, and your MAGI is less than $169,000, then you can fully contribute to your Roth. The phase-out begins at $169,000. And, if you earn more than $179,000, you can’t contribute to a Roth at all.
If you don’t meet the income requirements for a Roth, you may want to check with a financial advisor about converting a traditional IRA to a Roth, as a “back door” method of taking advantage of the tax-free growth and other benefits available with a Roth IRA. As of January 1, 2010, the $100,000 income cap for Roth conversions was removed; so now, anyone can convert. A financial advisor can help you decide whether it’s a good financial move for you.
Stephen A. Mendel, Estate Planning Attorney
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