How Much Money Can Be Put Into an IRA Annually?

by Chris Joseph

Individual Retirement Accounts were designed to help you save for your retirement years while also providing you with certain tax advantages. Most people have the option to choose a traditional or Roth IRA, or even both. The IRS places limitations on how much you can contribute to an IRA, with the amount depending on the type of IRA selected.

Identification

With a traditional IRA, you make contributions on a pre-tax basis, meaning you may be able to use the contributions to reduce your taxable income for the year. You won't have to pay taxes on the money until you begin to make withdrawals, typically after reaching age 59 1/2. Roth IRA contributions are made on an after-tax basis, but you normally receive the money on a tax-free basis when you to withdraw it.

Traditional IRA

As of the time of publication, the IRS allows you to contribute $5,000 per year to a traditional IRA if you are under age 50, and $6,000 if you are 50 or older. You can contribute the maximum amount even if you are covered by an employee-sponsored retirement plan at work, such as a 401k. However, contributions made to an employer-sponsored plan by you and your spouse can impact how much of your IRA contribution may be tax-deductible.

Roth IRA

The $5,000 and $6,000 annual threshold figures also apply to Roth IRAs, but certain income restrictions may apply. As of the time of publication, the amount of your allowable contribution begins to diminish when the modified adjusted gross income (MAGI) of you and your spouse exceeds $167,000, and you cannot contribute to a Roth at all if your income is $177,000 or greater. If you're single, the phase-out begins when your income exceeds $105,000 and you cannot contribute when your MAGI reaches $120,000.

Multiple IRAs

It is possible to have more than one of the same type of IRA or even have a Roth and a traditional IRA. However, regardless of the number of IRAs you have, your total annual contributions cannot exceed the $5,000 or $6,000 threshold. If you have both a traditional and Roth IRA, you will need to consider your income level and how much you may be able to deduct from your taxes when allocating your contributions.