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 In this article we're going to discuss Roth IRA limits. This includes the two broad categories of compensation/ income limits, which affect eligibility, as well as those limits that apply to contributions to a Roth IRA account. We're also going to provide up to date information on the contribution limits for 2006, 2007 and 2008 including catch-up contributions.
Roth IRA Plans
Roth IRA plans are a powerful way to save for your retirement years. They offer you the benefit of saving after-tax money and provide you with a source of tax-free income in retirement. Other benefits of Roth IRAs include:
- Contributions can be made at any age as long as you have some form of compensation.
- Tax-free withdrawals or distributions from your Roth IRA after age 59 1/2.
- No forced minimum required distributions at age 70 1/2.
We've got a lot more detail on Roth IRAs in some of the articles we've previously published. If you want more detailed information that we are presenting here, you might want to take a look at Roth IRA Contribution Limits or Roth IRA Rules.
Roth IRA Income / Compensation Limits
There aren't many things that can stop you from investing in a Roth IRA, but one of them is too much income. Stated another way, if you make too much money, then you may not be eligible to contribute to a Roth IRA. In fact, there is even an income threshold where you're only eligible for a reduced contribution - those are known as the phase-out limits.
We're not talking about your gross income; we're talking about your adjusted gross income or AGI - a calculation that is normally performed when you complete your federal income taxes on Form 1040 sent to the IRS. In case you don't know your exact AGI, you can simply pull out last year's form and look for the reference to AGI - which is normally line 36.
These income or compensation eligibility limits, as stated by your AGI, for Roth IRAs for the years 2007 and 2008 appear in the table below:
Roth IRA Income Limits 2007 / 2008
| Filing Status |
Full Contribution |
Reduced Contribution |
| Single /Head of Household |
Up to $99,000 |
$99,001 to $114,000 |
| Married Filing Jointly |
Up to $156,000 |
$156,001 to $166,000 |
Roth IRA Contribution Limits
The second limit that applies to Roth IRAs has to do with the contribution you're eligible to make in a single tax year. The exact number really depends on two things. If you're age 50 or older by the end of the calendar year, then you're also eligible to make an additional catch-up contribution.
The second factor that can affect your level of funding has to do with whether or not a reduced contribution applies to you because of the income limitation previously mentioned. The current contribution limits for Roth IRAs appear in the table below:
Roth IRA Contribution Limits
| Tax Year |
Annual Contribution Limit |
Catch-Up Limit |
| 2005 |
$4,000 |
$500 |
| 2006 |
$4,000 |
$1,000 |
| 2007 |
$4,000 |
$1,000 |
| 2008 |
$5,000 |
$1,000 |
|
2009 and beyond |
Indexed to Inflation |
Indexed to Inflation |
Roth Contribution Example
Here's an example demonstrating how this table works. In the tax year 2007 individuals eligible for a full contribution to a Roth IRA can contribute up to $4,000. But if that individual is age 50 or older by the end of the calendar year, then they can contribute $4,000 plus $1,000 or $5,000 in 2007.
And while the catch-up contribution limit for a Roth IRA does not increase in 2008, the annual contribution does. So that same individual age 50 and older can contribute up to $5,000 plus $1,000 or $6,000 in 2008.
Finally, if you're really into financial planning, then you might be interested to learn that in the years beyond 2008, the Roth contribution limit will increase at the rate of inflation in $1,000 increments, while the catch up limit will move up in $500 increments.
Calculating Roth IRA Contributions
While it's certainly important to understand exactly how much you can add to your Roth IRA each year, it's equally important to understand if your retirement funding strategy is working. And to answer that question, we've got some retirement tools that can help.
About the Author - Roth IRA Limits
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