2011 IRA Contribution And Income Limits

If you’re looking to contribute to a new or existing Roth IRA or traditional IRA in 2011, we have the information to let you plan ahead.  There are some slight changes to the income limits from the 2010 limits, but not the contribution limits.

2011 Maximum Contribution Limits

The 2011 Roth IRA and traditional IRA contribution limits will be the same as in 2010.  What that allows is a maximum $5,000 contribution for both the Roth IRA and the traditional IRA.  If you are 50 years old or older you have the opportunity to make an additional “catch up” contribution of $1,000 (a total of $6,000 max. contribution).  The “catch up” contribution is available for both the Roth IRA and traditional IRA.

While the maximum contribution hasn’t changed, there are some slight changes to the income limits that phase out the allowable contributions or deductions.  All income limits will be based on your modified adjusted gross income or MAGI.

2011 Roth IRA Income Limits

Not everyone can contribute to a Roth IRA.  Your ability to contribute to a Roth IRA is based on your MAGI:

  • Single or  head of household - If your MAGI is up to $107,000, you can contribute up to the $5,000 max.  If at least $107,000 up to $122,000, your contribution limit is phased out.  If $122,000 and above, you can not contribute to a Roth IRA.
  • Married, filing jointly – If your MAGI is up to $169,000, you can contribute up to the $5,000 max.  If at least $169,000 up to $179,000 your maximum contribution limit is phased out.  If $179,000 and above, you can not contribute to a Roth IRA.
  • Married, filing separately, but lived with spouse at any time during the year – If your MAGI is between $0 and $10,000, your contribution is phased out.  If $0, you can contribute up to the $5,000 max.  If $10,000 and above you can not contribute to a Roth IRA.

2011 Traditional IRA Income Limits

Although everyone can contribute the maximum amount to a traditional IRA, the amount you are able to deduct  for tax purposes is different based on your MAGI:

  • Single or head of household -If your MAGI is up to $56,000, you can take the full deduction.  If $56,000 up to $66,000, you get a partial deduction.  If $66,000 or more, you can not take a deduction.
  • Married, filing jointly - If your MAGI is up to $90,000, you can take the full deduction.  If $90,000 up to $110,000, you get a partial deduction.  If $110,000 or more, you can not take a deduction.
  • Married , filing separately - If your MAGI is less than $10,000, you can take a partial deduction.  If $10,000 or more, you can not take a deduction.

Don’t Have An Employer-Sponsored Retirement Plan

If you don’t have an employer-sponsored retirement plan, your traditional IRA deductions are slightly different:

  • Single or head of household – Any MAGI can take the full deduction.
  • Married, filing jointly or separately with a spouse who is not covered by a plan at work – Any MAGI can take the full deduction.
  • Married, filing jointly with a spouse who is covered by a plan at work - If your MAGI is up to $169,000, you can take the full deduction.  If $169,000 up to $179,000, you can take a partial deduction.  If $179,000 or more, you can not take a deduction.
  • Married, filing separately with a spouse who is covered by a plan at work – If your MAGI is up to $10,000, you can take a partial deduction.  If $10,000 or more, you can not take a deduction.

Still Time to Contribute For 2010

Even though the 2011 Roth IRA and traditional IRA limits are available, you still have time to contribute to either IRA for 2010.  If you haven’t maxed out your 2010 contributions you have until April 15, 2011 to contribute to a new or existing Roth or traditional IRA for 2010.  Opening an IRA and not sure which is best for you, review the benefits of a Roth IRA and traditional IRA.

You can contribute to both a Roth IRA and a traditional IRA, if you fit the Roth IRA income requirements.  Unfortunately, this doesn’t allow you to double your contribution limits.  The $5,000 ($6,000 if your over 50) limit is the combined total of your Roth IRA and traditional IRA contributions.  By contributing to both IRAs, you get the benefit of a diversified retirement tax strategy.  You get the immediate tax benefit from the traditional IRA contributions, and the future tax benefit from the Roth IRA.

Regardless of which IRA you choose to contribute to, now is the best time to open an IRA and start your savings.

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