How Much for an IRA Contribution for Over 50?

With all the tax benefits individual retirement accounts offer, its no surprise the Internal Revenue Service caps how much you can put in each year. When you reach that golden age of 50, however, your annual IRA contribution limit goes up because it includes an additional contribution, known as a catch-up contribution. If you go over your contribution limit, you'll still owe excess contribution penalties.

Standard Limits

For 2012, instead of the standard $5,000 contribution limit, if you're 50 or over you can contribute up to $6,000 to IRAs. Note that this limit applies to all IRAs combined -- for example, both Roth IRAs and traditional IRAs. This limit may change in future years to adjust for inflation, so check IRS Publication 590 for updates.

Minimal Compensation Required

In order to contribute to an IRA, you must have compensation during the year. This includes net self-employment income, wages and alimony, but not interest or dividends. If your compensation exceeds your annual contribution limit, you're allowed to contribute up to the limit. If your compensation is lower, your total compensation is your contribution limit. For example, if you're 50 or over and only have $3,400 in compensation, you're limited to contributing just $3,400 to your IRAs for the year.

Age Limits

Roth IRAs have no age limit for how old you can be when you make contributions, but the IRS imposes an age limit for traditional IRAs. If you'll be 70 1/2 or older by the end of the year, your contribution limit for your traditional IRA is zero. Unlike 401(k) plans, you cannot continue to contribute to the traditional IRA if you are still working.

Income Limits

Your contribution limit for Roth IRAs is less than $6,000 if your modified adjusted gross income is too high. The limits, which include a phaseout range, vary based on your filing status. If you fall in the phaseout range, you have a smaller contribution limit. If you exceed the phaseout range, your contribution limit is zero. For example, in 2012 the phaseout range for single filers is $110,000 to $125,000. If you're in the phaseout range, the closer to $125,000, the lower your contribution limit. These phaseouts ranges may change annually.

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About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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