IRA Contribution Limits 2011
It is always best to prepare for the future. If you want to live a comfortable life when you reach the age of retirement, then you need to have a retirement plan. One of the options you have to save for retirement is by starting an IRA account. IRA or Individual Retirement Account isn’t the investment itself. The IRA is a retirement account holding the investments.
IRA basically has two types. You have traditional IRA and Roth IRA. You need to understand more about these IRA’s for you to decide which is most suitable for you. After you have determined which type of IRA is right for you, you then have to know about the rules that govern IRA’s. When it comes to Traditional and Roth IRA rules, it may refer to eligibility rules, contribution rules and withdrawal rules.
IRA Contributions Limits for 2011
Before we will discuss about IRA contribution limits 2011, let us first find out who are allowed to make contributions to IRA. With traditional IRA, you have to be under 70 ½ years of age at the end of the calendar year and you also need to have some form of compensation to be able to make contributions. Compensation can be in the form of salaries, wages, bonuses and commissions. Roth IRA on the other hand doesn’t have age restrictions. Anyone can make contributions to Roth IRA as long as you have taxable compensation.
Contribution Rules for IRA Types
The IRA contribution rules for Traditional IRA and Roth IRA are exactly the same. There are two sets of rules followed by traditional IRA and Roth IRA when it comes to contributions. There is the standard contribution and then there is the catch-up contribution. The standard contribution limit for the year 2010 of both Traditional IRA and Roth IRA is $5000.
You are allowed to make a catch-up contribution when if you are 50 years of age or older in the calendar year and the catch-up contribution for your traditional IRA and Roth IRA for the year 2010 is $1000. Adding up the standard contribution and the catch-up contribution, you will have a total contribution of $6000. The contribution limits for the year 2010 are the same with traditional IRA and Roth IRA contribution limits 2011 due to the negligible inflation in 2010. However, these limits are expected to increase in the year 2012 and beyond based on the rate of inflation.
Now that you know about 2011 IRA contribution limits, it is also important that you know about the income limits for your traditional IRA and Roth IRA. Keep in mind that you won’t be allowed to make a full contribution to your IRA or you may not be able to make contributions to your IRA. The income limit will be based on your adjusted gross income or AGI. It would be best if you also know more about the income limits for the year 2011 as this is a bit more complex compared to the other rules involved in Roth IRA. So if you are thinking of saving for retirement, better start researching your options now.