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Understanding IRA contribution limits is essential for maximizing retirement savings. These limits can vary based on income levels and tax filing status. This article provides an overview of current rules and how income affects contribution eligibility.
Standard IRA Contribution Limits
For the tax year 2024, the maximum contribution limit for traditional and Roth IRAs is $6,500 for individuals under age 50. Those aged 50 and above can contribute an additional $1,000 as a catch-up contribution, totaling $7,500.
Income Limits and Roth IRA Eligibility
Income levels determine eligibility to contribute directly to a Roth IRA. For 2024, the contribution eligibility phases out for single filers with modified adjusted gross income (MAGI) between $138,000 and $153,000. For married filing jointly, the phase-out range is $218,000 to $228,000.
If your income exceeds these ranges, you may consider a “backdoor” Roth IRA contribution or contribute to a traditional IRA and then convert it to a Roth.
Traditional IRA Deductibility and Income
Contributions to a traditional IRA may be tax-deductible depending on income and participation in employer-sponsored retirement plans. For 2024, if you or your spouse are covered by a retirement plan at work, the deduction phases out for MAGI between $73,000 and $83,000 for single filers, and between $116,000 and $136,000 for joint filers.
Additional Considerations
Income limits can change annually, so it is important to stay updated. Also, contribution limits are aggregate across all IRAs, meaning the total contribution to traditional and Roth IRAs cannot exceed the annual limit.