Maximum Contribution Limits on Individual Retirement Accounts
The contribution limits for individual retirement accounts, or IRAs, depend on the type of IRA you own, your age and in some cases, your income. The Internal Revenue Service governs the types of contributions you may make to each, and the detectability of your contribution. Types of IRAs include the traditional and Roth IRAs, SIMPLE IRAs, SEP IRAs and inherited IRAs.
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Traditional and Roth IRAs
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The maximum contribution limits for traditional, Roth and spousal IRAs allow a total contribution of $5,000 for people under age 50 in 2011. Individuals age 50 and older may contribute an additional $1,000 for a total of $6,000. You may divide your total contribution allowance between a traditional or Roth IRA. To contribute, you must show taxable income equal to or exceeding your contribution. For example, to contribute $5,000 you must earn at least $5,000 for the tax year. Spouses who do not work may establish a traditional or Roth spousal IRA if the total family income covers the contributions for each spouse. You may deduct traditional IRA contributions from taxes, but you make Roth IRA contributions with after-tax dollars if you meet income guidelines. Roth contribution limits phase outs between $107,000 and $122,000 if you are single, and $168,000 and $179,000 if you are married.
SIMPLE IRA
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A Savings Incentive Match Plan for Employees, or SIMPLE IRA, is established by an employer with less than 100 employees. A SIMPLE IRA accepts only payroll deduction contributions and an employer matching contribution. In 2011, employees may elect a maximum payroll deduction of $11,500 if they are under age 50. Those who are age 50 or older may contribute a total $1,400 through salary reductions. Employers match up to 3 percent of an employee's income.
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SEP IRAs
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A Simplified Employee Pension, or SEP IRA, accepts only employer contributions. Employers may contribute up to 25 percent of an employee's compensation. In 2011, the maximum compensation considered for a SEP contribution equals $245,000 or less. The maximum dollar contribution to a SEP IRA may not exceed $49,000.
Inherited IRAs
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You may inherit a traditional or a Roth IRA from someone other than your spouse. Rules for inherited IRAs require you re-title the account to reflect the deceased individual -- the original account owner. For example, title an inherited IRA as Mary Smith, deceased, for the benefit of Rachel Smith, beneficiary. Because Mary Smith's ownership is indicated in the account title, you may not contribute to an inherited IRA. However, you must take annual distributions from the account according to IRS rules.
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