Your Guide To Roth IRA Income Limits

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Roth IRA Income Limits, Contributions and Taxes

roth ira income limits
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IRAs were created by the IRS to help individuals save for their own retirement; taking the financial pressure off of social security benefits. In the early 1970’s the Traditional IRA came out followed by the Roth IRA in the late 1990’s.

The Traditional IRA and Roth IRA income limits, contribution limits and taxation rules are different. Which IRA you should invest in depends upon your personal financial situation. Before investing be sure to weigh the following differences between a Roth IRA and a Traditional IRA to see which investment type best fits your financial and retirement needs.

What Is A Roth IRA?

A Roth IRA allows you to invest after-tax money for retirement; therefore when you retire your withdraws are tax-free.

What Is A Traditional IRA?

With a Traditional IRA your contribution amounts are tax-deferred so you pay taxes at the time of withdrawal. One advantage is that these contributions can be tax-deductible thereby lowering your taxes during your working years.

Roth IRA Income Limits

For 2013, if filing as a single, the Roth IRA income limits state that you cannot make more than $127,000. If filing jointly, you cannot earn more than $188,000.

For 2014, Roth IRA rules state that you cannot earn more than $129,000 if a single filer or $191,000 if filing jointly.

IRA Contribution Limits

IRA contribution limits for Roth IRAs and Traditional IRAs are the same, although the contribution amount can vary from year to year.

Roth IRA Contribution Limits 2013

The Roth IRA contribution limits for 2013 have increased from 2012.

Roth IRA contribution limits 2012 for individuals age 49 and below were $5,000 and $6,000 for individuals over age 50. Whereas 2013 IRA contribution limits increased to $5,500 for individuals age 49 and under and $6,500 for those over age 50.

Contribution limits for 2014 are the same as IRA contribution limits 2013.

401k’s and IRAs

Many individuals invest in their IRAs only after they have maxed out their 401k. But you do not have to; you can invest in an IRA and a 401k. However, investing into a Traditional IRA and a 401k in the same tax year can remove your ability to tax deduct your Traditional IRA contributions for that tax year so double-check with your accountant.

If you are still interested, here are the max 401k contribution 2013 and 2014 limits: $17,500 if age 49 or under and $23,000 if age 50 or older.

Roth IRA rules, Roth IRA income limits, contribution limits and taxation can seem complicated and confusing; but never allow that confusion to deter you from investing for your retirement. You care about your retirement more than anyone else does; learn the rules so they do not become a distraction for you.

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