Why You Should Contribute to Your IRA Even When Things are Tight…

Most of us have been raised to be polite and put others before ourselves, but when it comes to your money this isn’t often a winning strategy. It’s an especially poor tactic to take toward saving for your future, ‘cause you gotta take care of yourself right?!

If you’ve been putting off savings or skimping on your IRA contributions, now is your catch up time (and this year you’ve got a few extra days to do so.) You have until the tax deadline (April 17th this year) to make contributions to your 2011 IRA.

Still, you need to be aware of the contribution limits. You cannot go over these limits, but many people don’t even come close.  Contribution limits are as follows:

2011 Combined Traditional and Roth IRA Contribution Limits:

If you are under 50 years of age at the end of 2011: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2011. This limit can be split between a traditional IRA and a Roth IRA but the combined limit is $5,000.The maximum deductible contribution to a traditional IRA and the maximum contribution to a Roth IRA may be reduced depending on your modified adjusted gross income.

If you are 50 years of age or older before the end of 2011: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 or the amount of your taxable compensation for 2011. This limit can be split between a traditional IRA and a Roth IRA but the combined limit is $6,000. The maximum deductible contribution to a traditional IRA and the maximum contribution to a Roth IRA may be reduced depending on your modified adjusted gross income.

See Publication 590Individual Retirement Arrangements (IRAs) for additional information.

Advertisements

One Comment

  1. Posted June 5, 2012 at 7:15 am | Permalink | Reply

    This is an excellent summary of the IRA contribution. My wife is self employed and has a special kind of 401k called a “Individual 401K” that allows her save up to $49,000 a year on a pre-tax basis!

Post a Comment

Required fields are marked *

*
*

%d bloggers like this: