Find 2013 Roth IRA limits.
A Roth IRA is a unique type of retirement account. Unlike a traditional IRA or 401(k), there is no upfront tax deduction for investing in a Roth. But while contributions and investments in a traditional IRA or 401(k) can grow without being taxed until you withdraw the money at retirement, with a Roth IRA the earnings are never taxed. Just as with other types of retirement plans, there are limits on the amount you can contribute to a Roth IRA and income restrictions for owning one. These limits are determined by the Internal Revenue Service and they adjust over time. Here are the Roth IRA contribution and income limits for 2012.(Limits change each year, find 2013 limits on the Roth IRA Limits 2013 page.
Roth IRA Contribution Limits 2012
In 2012, individuals can contribute up to $5,000 to a Roth IRA, or $6,000 for those age 50 or older (people in that age group are considered catch-up contributors, because they are closer to retirement age and may need to accelerate their retirement savings). The same amounts can be contributed to a traditional IRA.
Roth IRA Income Limits 2012
There are restrictions on who can contribute to a Roth IRA. Individuals and couples with very high incomes are not eligible to contribute to a Roth, because the tax-favored status of a Roth IRA exists to encourage personal savings by those who need it most, not as a tax hedge for the wealthy. Additionally, a Roth IRA is most beneficial if your tax rate today is lower than it will be when you take the money from the account. If you are in a relatively low tax bracket and just starting out, a Roth IRA can be a great savings option.
For 2012 individuals who are single or head of household can contribute the full amount in a Roth IRA if their adjusted gross income is less than $110,000. The contribution amount is reduced (or “phased out”) for individuals with incomes between $110,000 and $125,000. Singles with higher than $125,000 do not qualify for a Roth IRA. For couples filing jointly (or qualifying widows/widowers), the contribution amount is reduced between $173,000 and and $183,000 in adjusted gross income. Couples with incomes greater $183,000 do not qualify.
If you are married and filing separately, you can not make a contribution to a Roth IRA if your adjusted gross income is greater than $10,000.
Where a Roth IRA Fits Into Your Plan
A Roth IRA is just one type of retirement account, and a great strategy for retirement savers is to have a Roth IRA in conjunction with a 401(k), traditional IRA, SIMPLE IRA or SEP IRA. Remember, with other types of IRAs, you may qualify for a tax deduction for the money you contribute. But if you withdraw the money before the retirement age of 59 1/2, you are likely to pay federal, state and perhaps local income taxes, as well as a 10% fee (there are some exceptions). With a Roth IRA, you don't get the upfront tax deduction but you don't pay taxes on the money when you withdraw it. Even better, you can withdraw your contributions (but not investment earnings) before retirement without penalty. Find out why a 401(k) and a Roth IRA can be such a great combination.