What Is the Most a Single Person Can Put in a Roth IRA?

Many people put aside money for retirement through a plan at work, such as a 401k plan or 403b plan. However, if you expect to be in a higher income tax bracket at retirement than you fall in during the current year, you may benefit from contributing to a Roth IRA.

Size

The maximum annual contribution limit, set by the Internal Revenue Service, adjusts annually for inflation. As of 2010, the maximum contribution equals $5,000 or your earned income total for the year, whichever is smaller. If you are 50 or older, the contribution limit increases to $6,000.

Considerations

If your modified adjusted gross income (MAGI) exceeds the annual limits, you cannot contribute to a Roth IRA. If you fall in the phase-out range, your contribution will decrease based on how close you are to the absolute contribution limit. For example, for 2010 if you are single, your contribution limit decreases if your MAGI falls between $105,000 and $120,000. Singles with MAGIs in excess of $120,000 cannot contribute to a Roth IRA.

Misconception

The IRS does not limit the amount of money that can be held in a Roth IRA, just the amount that can be contributed per year.

References

• Internal Revenue Service: Publication 590 (Chapter 2)
• State Farm: Roth IRA