A major step in the retirement planning guide is to understand all the savings tools available. The IRA is the most versatile tool in your retirement toolbox. To take advantage of it, you should stay on top of yearly changes to the IRA contribution limits.
Each year the IRS announces the inflation adjusted numbers for the traditional and Roth IRA contribution limits along with the traditional IRA deduction limits. These cost of living adjustments are made when the inflation index meets a certain criteria. In turn, the adjustments prevent inflation from eating away at the IRA limits and your ability to save for retirement.
2016 IRA Contribution Limits
The 2016 IRA contribution limits will look just like it did for 2015. Both the traditional and Roth IRA will have the same contribution limit, which will max out at $5,500. If you are 50 years or older, there is a $1,000 catch up contribution.
| 2016 Limits | Max Contribution | Catch Up Contribution (Age 50+) |
| Traditional IRA | $5,500 | Additional $1,000 ($6,500 total) |
| Roth IRA | $5,500 | Additional $1,000 ($6,500 total) |
You can find prior year limits for each IRA along with other important information in the traditional IRA rules and Roth IRA rules guides.
The best IRA for you will depend on your MAGI or modified adjusted gross income, whether you meet the income requirements, or if a deduction is more helpful. You can also split the difference and divide the maximum $5,500 between a traditional and Roth IRA if you qualify for both.
2016 Roth IRA Income Limits
Not everyone can use a Roth IRA. Actually, the less you make the better, since there is a limit based on your income. That said, the Roth IRA income limits were raised slightly for 2016.
| Contribution Limits | Single or Head of Household | Married, Filing Jointly | Married, Filing Separately |
| Full Contribution | $0 – $117,000 | $0 – $184,000 | $0 |
| Partial Contribution | $117,000 – $132,000 | $184,000 – $194,000 | $0 – $10,000 |
| Ineligible | $132,000 or more | $194,000 or more | $10,000 or more |
If you only qualify for a partial contribution, there is a breakdown of the Roth IRA partial contribution phaseout by income in the tables at the end of this post. It should be enough to tell you whether a Roth is a good idea for your situation.
Before you contribute to a Roth IRA, check if you qualify for a traditional IRA deduction too. The extra tax savings might be worth it.
2016 Traditional IRA Deduction Limits
Unlike the Roth IRA, the traditional IRA does not put income limits on the amount you can contribute. Instead, if you meet the income requirements, you can deduct some or all of those contributions from your taxable income. In essence, you get extra tax savings now while saving for retirement.
| Deduction Limits | Single or Head of Household | Married, Filing Jointly | Married, Filing Separately |
| Full Deduction | $0 – $61,000 | $0 – $98,000 | not allowed |
| Partial Deduction | $61,000 – $71,000 | $98,000 – $118,000 | $0 – $10,000 |
| No Deduction | $71,000 or more | $118,000 or more | $10,000 or more |
If your MAGI qualifies as a partial deduction, you’ll find a breakdown of the traditional IRA partial deduction phaseout by income in the tables at the end of this post. It should give you a good idea of a deduction amount come tax time.
Don’t forget, even if you don’t qualify for a deduction, you can still make the maximum contribution allowed for a traditional IRA.
No Retirement Plan Through Work?
If your work doesn’t offer a retirement plan, your traditional IRA deduction limits might be different depending on your situation:
- Single or Head of Household – any MAGI amount can take the full deduction.
- Married, filing jointly or separately with a spouse not covered by a plan at work – any MAGI amount can take the full deduction.
- Married filing jointly with a spouse covered by a plan at work – if your MAGI is up to $184,000, you can take the full deduction. If your MAGI is more than $184,000 but less than $194,000, you can take a partial deduction. If your MAGI is $194,000 or more, you can not take a deduction.
Get Started
The best way to take advantage of these IRA limits to get started now. You can set up a new IRA in just a few minutes or add to an existing one before the deadline. Make sure you mark the correct tax year when making your contribution. Don’t wait until the last minute.
IRA Phase Out Tables
The tables below are for the Roth IRA phase out and Traditional IRA phase out for the single, head of household, and married filing jointly tax filers only. If your MAGI falls in between the income levels shown, you’ll have to do some math to find your exact amount. The tables should give you a good sense of where you stand at tax time.
Roth IRA Partial Contribution Phase Out
| MAGI | Under Age 50 Contribution Limit | Age 50+ Contribution Limit |
| $117,000 | $5,500 | $6,500 |
| $118,000 | $5,133 | $6,067 |
| $119,000 | $4,766 | $5,634 |
| $120,000 | $4,399 | $5,201 |
| $121,000 | $4,032 | $4,768 |
| $122,000 | $3,665 | $4,335 |
| $123,000 | $3,298 | $3,902 |
| $124,000 | $2,931 | $3,469 |
| $125,000 | $2,564 | $3,036 |
| $126,000 | $2,197 | $2,603 |
| $127,000 | $1,830 | $2,170 |
| $128,000 | $1,463 | $1,737 |
| $129,000 | $1,096 | $1,304 |
| $130,000 | $729 | $871 |
| $131,000 | $362 | $438 |
| $132,000 | $0 | $0 |
| MAGI | Under Age 50 Contribution Limit | Age 50+ Contribution Limit |
| $184,000 | $5,500 | $6,500 |
| $185,000 | $4,950 | $5,850 |
| $186,000 | $4,400 | $5,200 |
| $187,000 | $3,850 | $4,550 |
| $188,000 | $3,300 | $3,900 |
| $189,000 | $2,750 | $3,250 |
| $190,000 | $2,200 | $2,600 |
| $191,000 | $1,650 | $1,950 |
| $192,000 | $1,100 | $1,300 |
| $193,000 | $550 | $650 |
| $194,000 | $0 | $0 |
Traditional IRA Partial Deduction Phase Out
| MAGI | Under Age 50 Deduction Limit | Age 50+ Deduction Limit |
| $61,000 | $5,500 | $6,500 |
| $62,000 | $4,950 | $5,850 |
| $63,000 | $4,400 | $5,200 |
| $64,000 | $3,850 | $4,550 |
| $65,000 | $3,300 | $3,900 |
| $66,000 | $2,750 | $3,250 |
| $67,000 | $2,200 | $2,600 |
| $68,000 | $1,650 | $1,950 |
| $69,000 | $1,100 | $1,300 |
| $70,000 | $550 | $650 |
| $71,000 | $0 | $0 |
| MAGI | Under Age 50 Deduction Limit | Age 50+ Deduction Limit |
| $98,000 | $5,500 | $6,500 |
| $99,000 | $5,230 | $6,180 |
| $100,000 | $4,950 | $5,850 |
| $101,000 | $4,680 | $5,530 |
| $102,000 | $4,400 | $5,200 |
| $103,000 | $4,130 | $4,880 |
| $104,000 | $3,850 | $4,550 |
| $105,000 | $3,580 | $4,230 |
| $106,000 | $3,900 | $3,250 |
| $107,000 | $3,030 | $3,580 |
| $108,000 | $2,750 | $3,250 |
| $109,000 | $2,480 | $2,930 |
| $110,000 | $2,200 | $2,600 |
| $111,000 | $1,930 | $2,280 |
| $112,000 | $1,650 | $1,950 |
| $113,000 | $1,380 | $1,630 |
| $114,000 | $1,100 | $1,300 |
| $115,000 | $830 | $980 |
| $116,000 | $550 | $650 |
| $117,000 | $280 | $330 |
| $118,000 | $0 | $0 |
