IRA Contribution Limits
An Individual Retirement Account (IRA) is an excellent way to save for retirement.
(PRWEB) February 3, 2005 -- An Individual Retirement Account (IRA) is an excellent way to save for retirement especially if your job does not offer a retirement plan, or if you are unable to open a self-employed 401k with a loan feature, according to the retirement plan specialists at Lamaute Capital, Inc (www.Investsafe.com).
The main advantages of the IRA are that it allows tax-deferred growth, and if you qualify, your contributions may also be tax-deductible.
You may contribute to both a traditional IRA and a Roth IRA as long as your contributions do not exceed the total IRA contribution limits. For 2004, the limit is $3,000 ($3,500 if age 50 or older). The IRA contribution limits increase to $4,000 ($4,500 if age 50 or older), for 2005. You may contribute to an IRA even if you have contributed to a 401(k) or other retirement plan.
IRAs can be established by anyone under 70 1/2 years old with earned income at least equal to their IRA contribution amount. However, you are allowed to open an IRA for a non-working spouse with no income. To establish a spousal IRA the husband and wife must file a joint income tax return and the receiving spouse must have less compensation than the contributing spouse.
IRA contribution limit (traditional and Roth IRAs):
Tax year 2004 $3,000
Tax year 2005 $4,000
Catch-Up (50 year and older)
Tax years 2004 and 2005 $500
Traditional IRA - Income phase-out range for determining tax deductibility:
| | - For individuals covered by an employer-sponsored plan and filing as:
|
Single
Tax year 2004 $45,000 - $55,000
Tax year 2005 $50,000 - $60,000
Married filing jointly
Tax year 2004 $65,000 - $75,000
Tax year 2005 $70,000 - $80,000
Married filing separately
Tax years 2004 and 2005 $0 - $10,000
| | - For individuals not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by an employer-sponsored retirement plan
|
Tax years 2004 and 2005 $150,000 - $160,000
Income phase-out range for determining ability to fund Roth IRA:
Tax years 2004 and 2005 $95,000 - $110,000
Tax years 2004 and 2005 150,000 - $160,000
| | - Married filing separately
|
Tax years 2004 and 2005 $0 - $10,000
| | - Annual income limit for determining ability to convert traditional IRA to Roth IRA
|
Tax years 2004 and 2005 $100,000
Lamaute Capital (www.investsafe.com) describes methods to make early withdrawal of deductible contributions from retirement plans that will not result in 10% tax penalty. Tax laws and regulations are complex and subject to change. Please consult an attorney or tax advisor about your particular situation
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