A couple of months back the IRS released their 2010 Traditional and Roth IRA contribution limits. It’s important to keep an eye on those limits year to year if you’re contributing to one of these account types. As was expected the 2010 Traditional and Roth IRA contribution limits remain the same for the coming tax year.
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2010 Traditional And Roth IRA Contribution Limits
The Traditional and Roth IRA contribution limits for the 2010 tax year are $5,000 for those under the age of 50. If you’re over 50 you have the option of making catch up contributions to your account, which brings your limit to $6,000.
It’s important to remember that you can contribute to both a Roth IRA and a traditional IRA in the same year, but you can’t go over your limit ($5,000-$6000) when you combine the two accounts. So if you were under 50, and contributed $2500 to a Roth IRA, you would only be able to contribute up to $2500 to your Traditional IRA.
Here’s a table showing the 2010 Traditional and Roth IRA contribution limits, along with the limits in years past.
| Year | Age 49 and Below | Age 50 and Above |
|---|---|---|
| 2002-2004 | $3,000 | $3,500 |
| 2005 | $4,000 | $4,500 |
| 2006-2007 | $4,000 | $5,000 |
| 2008-2012 | $5,000 | $6,000 |
| 2013-2018 | $5,500 | $6,500 |
| 2019-2022 | $6,000 | $7,000 |
| 2023 | $6,500 | $7,500 |
2010 Traditional And Roth IRA Phase Outs Based On AGI
Traditional and Roth IRAs have phase outs if you reach certain compensation limits. Single filers with an annual Modified Adjusted Gross Income (MAGI) over $105,000 begin to see their contribution limit drop until at $120,000 it goes away completely. The limits for Married Filing Jointly investors are $167,000-$176,000.
| IRA Type | Single | Married Filing Jointly |
|---|---|---|
| Roth IRA | $105,000 – $120,000 | $167,000 – $177,000 |
| Traditional IRA | $55,000 – $65,000 | $89,000 – $109,000 |
Contribute To Your Traditional Or Roth IRA Until April 15th
If you haven’t already contributed the full amount to your Traditional IRA or Roth IRA for the 2009 tax year, keep in mind that you can still open a Roth IRA and contribute to the accounts up until tax day, April 15th, 2010. If you do make a contribution in 2010 before tax day, be sure to specify which tax year the contribution is being made for.
Differences Between Roth IRA And Traditional IRA Accounts
The main difference between Traditional IRA and Roth IRA accounts is how they are looked at for tax purposes. Traditional IRA account contributions are made with pre-tax money. Because of that your distributions will be taxed in retirement. Roth IRA contributions, however, are made with dollars that have already been taxed. Because of that the money will grow and not be taxed at withdrawal. For a complete look at choosing between retirement accounts, check out this article: Choosing Between 401k, Traditional IRA, Roth IRA.
Do you currently have a Traditional IRA or Roth IRA? Are you contributing to the limit? Which account type do you prefer? Tell us your thoughts in the details.
I prefer the Roth. It seems to be the more prudent choice for most investors, but I know the advantages and benefits of both are a little complex.
Also, you kind of need a crystal ball to decide which choice is best for you.
In my situation, it seems to be the Roth
david/yourfinances101´s last post ..10 Essential Tips That Make Your Finances Lean & Manageable
I prefer a balanced approach and tax diversification. No one account is the end-all, be-all. Tax free money is great, but tax deductions NOW are great too! =)
Jason @ Redeeming Riches´s last post ..This Week in Personal Finance – January 22, 2010
Tax diversification probably isn’t a bad idea. Mike discussed this idea in Monday’s post on “Choosing A Retirement Account“.
I just added more money to my Roth for 2010 and set up monthly contributions to make sure I will max out by the end of the year.
Anti ROTH 100%! In fact, there’s a 105 comment post this week at the bottom which agrees why doing a ROTH over a traditional is unwise.
Don’t let the government brain wash innocent people folks. The truth must come out!
Have a nice day :)
Financial Samurai´s last post ..Be A Sloth and Don’t ROTH – Why Converting To A ROTH Is A Mistake!
I am mostly in Sam’s camp. Not quite 100% anti, but maybe 95%.
I’d be curious, from those who have chosen Roth, what bracket are you in now, and what is your projected pretax savings plus other income at retirement?
JoeTaxpayer´s last post ..A Roth Roundup
The phaseout for traditional IRA deductibility – I believe this only applies to those with a 401(k) or other (e.g. 403(b)) account at work. If they have no such account, the limit isn’t applicable.
Amazing how convoluted our tax laws are.