Individual Retirement Accounts
 

Maximum IRA Contribution

The maximum IRA contribution limit is set by the IRS in the Internal Revenue Code. Below are some frequently asked questions about the maximum IRA contribution.

What is the maximum IRA contribution?

In 2007, the maximum IRA contribution for individuals is:

$4,000 for people age less than 50

$5,000 for people 50 or older

When can I contribute maximum IRA contribution?

The maximum IRA contribution limit is per year so each year you can contribute the maximum IRA contribution limit amount. You have until the tax filing date which is usually April 15th to contribute the maximum IRA contribution amount.

If you rollover your IRA from a 401k, then the sooner you rollover the longer you have to contribute to your individual retirement account. If you rollover to an IRA in March, then you have until April 15th to make up to the maximum IRA contribution. If you rollover in April of the previous year then you will have a year to make your contributions.

Should I make the maximum IRA contribution?

Most people who can afford to make the maximum IRA contribution do. All contributions to an IRA are tax deferred which means all earnings grow tax free. For a traditional individual retirement account, contributions are tax free whereas for a Roth IRA they are not.

Will the maximum IRA contribution limit increase?

The maximum IRA contribution is usually raised every few years. If in doubt what the maximum IRA contribution limit is, check with the IRS because if your IRA contributions exceed the maximum IRA contribution limit you will be taxed on the excess contributions as well as be penalized by the IRS.