As you start making contributions to your Individual Retirement Account (IRA), be aware of potential restrictions related to amounts, deadlines, income and ages. These restrictions and limitations differ based on the type of IRA plan you have and are important to keep in mind as you build your savings. Don't sell yourself short on retirement savings. Start with the smallest contribution you can afford and build from there.
You can contribute up to $6,000 to Traditional and Roth IRAs, provided you're under age 50 and you've earned wages equal to that amount. If you're age 50 and older, you can contribute up to $7,000. For Simplified Employee Pension (SEP) IRAs, you can contribute 25 percent of your annual compensation, up to $58,000, regardless of age. If you contribute to more than one type of IRA, the combined total must be below the limit.
|Under 50||Age 50+|
|Traditional IRA & Roth IRA1||$6,000||$7,000|
|SEP IRA||25% of annual compensation2|
You have until April 15 of the current year to make contributions for the previous year. For example, for 2020 IRA contributions, you could have contributed at any time during 2020 and up until April 15, 2021.
Traditional and SEP IRAs
To contribute to a Traditional or SEP IRA, you must have earned income and be younger than 72 in that tax year. Earned income includes wages, salary, tips, bonuses, commissions and self-employment income; it excludes investments and pensions. If you're a non-earning spouse under the age of 72 who files a joint tax return with a working spouse, you also are eligible to contribute.
Depending on your income, you could be eligible to take a tax deduction on the amount you contribute to your Traditional or SEP IRA.
Income Limits for Tax Deductions
|Income for Married Filing Jointly||Income for Single Filer||Tax Deductability|
|$105K or less||$66K or less||100% tax-deductible|
|$105K-$125K||$66K-$76K||A portion is tax-deductible|
|$125K or more||$76K or more||Not tax-deductible|
To contribute to a Roth IRA, your earned income must be below or within the modified adjusted gross income (MAGI) limits. Unlike the Traditional IRA, there's no age restriction for contributing.
MAGI Roth Contribution Limits
|Income for Married Filing Jointly||Income for Single Filer|
1Maximum contribution listed in total combined amount allowed for Traditional and Roth.
Not to exceed $58,000.
If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.