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Roth IRA Contribution Limits

All retirement plans have contribution limits and Roth IRA is not an exception. The Roth IRA contribution limits are the same with the Traditional IRA contribution limits. In both cases for the year 2007 you can contribute maximum $4,000 if you are younger than 50 and $5,000 for 2008. If you are older than 50 you can contribute $5,000 for the year 2007 and $6,000 for the year 2008. If you are going to be 50 during the current year, you are entitled to a catch up contribution. This catch up contribution adds to the $5,000 for 2007 or $6,000 for 2008. Your Roth IRA contribution limits for the catch up contribution depend on your income. You are allowed to contribute the income or the maximum allowed contribution, whichever is smaller.

Something that you may find as being in your advantage is that the Roth IRA contribution limits are not related to age. As long as you have a salary and your income is within the limits required for being able to open a Roth IRA account, you are good to go. Furthermore, you are allowed to contribute as long as you want to your Roth IRA fund. You can contribute to Roth IRA if you have taxable salary and your modified adjusted gross income is less than $110,000 if you are single. If you are married and file joint return your income limit is 160,000.

If you have any other types of IRA accounts except the Roth IRA, the sum you can contribute to your Roth IRA is decreased. You will be able to contribute to your Roth IRA fund only with the remaining sum allowed by the contribution limits after making payments in your other IRA accounts. A good thing if you can and are allowed to is to put the maximum contribution allowed for the current year intro your Roth IRA account. For example the Roth IRA contribution limits for 2007 are $4,000 respectively $5,000 if you are over 50. If you put into your account $2,000, the following year you can only put the maximum allowed contribution which for 2008 is going to be $5,000 respectively $6,000 if you are over 50. This means you lost the possibility of adding at last another $2,000 in the year 2007. Thus your overall contribution will be lower than it could have been if you contributed the maximum allowed sum.

Even though Roth IRA contribution limits exist, one should know that there is a great advantage of the Roth IRA account. The advantage is that the contributions to Roth IRAs are not deductible under any circumstances. Since these contributions are tax-free, there are no penalties for taking contribution money from a Roth IRA account. It is in your advantage to put into the account the maximum possible sum allowed by the IRS. Your money is invested and grows tax free. In addition, you can even start withdrawing without getting taxed once you have the Roth IRA account for at least five years and you are at least 59 and half years old. Also with or without the contribution limits, the Roth IRA accounts are amongst the most flexible forms of retirement planning. You can use your Roth IRA to invest in a lot of things other retirement plans would consider prohibited transactions. If you are married and your wife is not working, but you do own enough for both of you, she can open a Roth IRA account as long as you can cover her contributions.

Roth Ira Contribution Limits ^

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