How Much Can I Contribute to My IRA?

The IRA contribution you can make depends on the type you choose. The following are the current amounts.

Traditional IRA

The maximum amount here is $2,000. However, it went up to $5,000 from 2002–08. For 2009 the restrictions will be modified based on inflation rates.

For now, the contribution you make is usually tax deductible. The amount is based on a percentage of your AGI (Adjusted Gross Income).

Your status as an employer-sponsored individual or not will be considered.

Your status during filing (single or joint) will be evaluated. The findings will determine if your IRA contribution is deductible or not.

Education IRA

The maximum amount is $500 annually. When cash grows it is tax free. It’s also given preferred treatment when the beneficiary uses it for education-related costs.

You should consult a finance expert before doing this. The rules are complex. There are limitations on who can make these contributions and the amounts involved.

There are also strict rules concerning what education expenses really are.


SEP stands for Simplified Employee Pension. Your employer can place 15% of your payment in this savings account. This is one of the most popular types as the tax requirements are less.

The administrative paperwork needed is also less. For employees, putting their IRA contribution here can be a good choice.

Simple IRA

This is similar to SEP but in many ways more advantageous. Employers can set up accounts for their employees. They can also make one for themselves.

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In addition, the contributions can reach $6,500 annually. The regulations for employers and employees differ, so check it first.

Roth IRA

Roth IRA isn’t deductible like the others. The benefit is there aren’t any taxes when it’s distributed. The buildup is also free of tax.

Your Adjusted Gross Income has to be below $95,000 (single) and $150,000 (married couples). Based on the IRA contribution rules, withdrawals aren’t allowed for the first five years.

Other Issues

Go through the rules for each one. This will help you decide which ones best suit your plan. The rules concerning tax deductibles also depend on your status. Generally, it depends on the tax compensation you get in a tax year.

An example is the following. If you and your spouse made more than the maximum deductible for the retirement account, you can get full deductions. This is also assuming neither of you is in a qualified plan.

If you and your spouse have an employer sponsor, the tax deductions will depend on your AGI. Usually, the deduction commences at $34,000. If the AGI is over $44,000, it isn’t deductible at all.

However, this amount is subject to change. Always check with your tax consultant to get the right figures.


Like 401k, these funds can be withdrawn before you are 59 and a half years old. But there is a 10% tax penalty.

You should check with your financial adviser to be sure. You should also keep an eye on the laws. Every few years Congress reviews these laws, so be updated.

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To make the most of your IRA contribution, study each one carefully. Determine what you need, and take the appropriate steps to implement it. It’s never too early to start planning for retirement.