Retirement Planning: 2011 IRA Contribution Limits
Maximizing your IRA contributions is an effective method of saving for retirement. The Internal Revenue Service imposes strict limits on the amount of annual contributions which may be made to IRAs. Your contribution limit will depend upon the type of IRA, your age, your income, and the source of the contribution.
Traditional IRA: 2011 contribution limits
Contribution limits for a traditional IRA depend upon your age at the end of calendar year 2011. If you are under age 50 at the end of 2011, then the amount that you may contribute to your traditional IRA is limited to the lesser of $5,000 or the amount of your taxable compensation earned in 2011. If you are 50 or older at the end of 2011, then you may contribute up to an amount equal to the lesser of $6,000 or the amount of your taxable compensation for 2011.
Roth IRA: 2011 contribution limits
Generally, the contribution limits for a income limit. If you are married and filing a joint return or a qualifying widower, you may not contribute to a Roth IRA if your adjusted gross income (AGI) is $179,000 or greater, and your Roth IRA contribution limit will be reduced if your AGI is between $169,000 and $179,000, and you must complete an IRS worksheet to determine the amount of your Roth IRA contribution.
If you are married, filing separately and you lived with your spouse at any time during the year, then you may not make a Roth IRA contribution if your AGI is $10,000 or higher. Additionally, if your AGI is more than $0 but less than $10,000, then your Roth IRA contribution limit is reduced and you must complete an IRS worksheet to determine the amount of your Roth IRA contribution for the year.
If you are single, head of household, or married, filing separately and did not live with your spouse at any time during the year, then you may not make a Roth IRA contribution if your AGI is $122,000 or higher. If your AGI is between $107,000 and $122,000, then your Roth IRA contribution limit is reduced and you must complete an IRS worksheet to determine the amount of your Roth IRA contribution for the year.
Spousal IRA: 2011 contribution limits
If you are married, filing a joint tax return, and your taxable compensation is less than your spouse’s taxable compensation, then you may make a contribution to your IRA up to the lesser of $5,000 ($6,000 if you are 50 or older) and the total compensation included in gross income for you and your spouse reduced by your spouse’s IRA contributions for the year.
SIMPLE IRA: 2011 contribution limits
A SIMPLE (Savings Incentive Match Plans for Employees) IRA provides a mechanism for employees to make tax deferred contributions to an IRA. An employee covered by a SIMPLE IRA may elect to defer up to $11,500 of their annual compensation, which the employer then contributes to a SIMPLE IRA on behalf of the employee. Employees who are 50 or over may make an additional elective deferral equal to the lesser of $2,500 or their total compensation for the year less any other elective salary deferrals. The employer must make a matching contribution of the lesser of the amount of the employee’s elective salary deferral or 3 percent of the employee’s annual compensation. In other words, since the amount of the employer’s matching contribution can not exceed $11,500 (the maximum employee salary deferral), the total annual contribution to a SIMPLE IRA cannot exceed $23,000.
SEP IRA: 2011 contribution limits
A SEP (Simplified Employee Pension) IRA allows an employer to make contributions to an IRA on behalf of an employee. Employer contributions to a SEP IRA cannot exceed the lesser of 25 percent of the employee’s annual compensation or $49,000.
Internal Revenue Service Publication 560 “Retirement Plans for Small Business”
Internal Revenue Service Publication 590 “Individual Retirement Arrangements”