2010 IRA Contribution Limits

Saving for retirement is an issue that nobody should ignore. All the latest updates about retirement saving plans should be checked out regularly. An investment made now can make your retirement period more comfortable. Along with private investments, individual retirement accounts (IRAs) are an important part of saving plans for individuals.

There are various types of IRAs available, to cater the needs of people from various income groups. For every type of IRA program, there are different contribution limits. Also, the contribution limits vary according to the age of the person who is investing.

The IRA is one of the most basic saving plans. IRA account is basically a saving account that pays regular interest. It currently offers an average interest value of 4% to 5%. The rules of IRA investment are such, that once a person starts investing in such a plan, he has to keep the money invested till maturity. In case of early withdrawal, heavy penalties are imposed on the individual. The penalties that need to be paid are so high, that some individuals lose as much as half their investment on early withdrawal! These penalties have been purposefully created to encourage people in saving for their retirement.

Another special feature of an IRA account is of course the annual contribution limits imposed by the federal government. These contribution limits are imposed on every type of IRA. These contribution limits are decided by the internal revenue service after studying the levels of inflation every year. Most people prefer investing in an IRA due to the inherent tax benefits it offers. Basically, you are not taxed on the amount you contribute to traditional IRAs. Ideally, money invested in an IRA account is withdrawn after 70 years of age, when it really comes in handy. You also have an option of investing in other types of IRA accounts like non-deductible traditional IRA, Roth IRA, SEP IRA and simple IRAs.

IRA Contribution Limits

Firstly, the news is that IRA contribution limits for 2010 are unchanged. That is, the contribution limits are same as 2009.

Traditional IRA
The IRA contribution limits for the traditional variety are same as those in 2009. The maximum contribution limit, if you are younger than 50 years is $5,000. However, if your age is more than 50 or more by the end of the year, then you have an option of contributing an extra $1,000 and have a total contribution limit of $6,000. In case, you are investing in two plans, that is in traditional, as well as Roth IRA, then you have a combined IRA contribution limit of $6,000.

Roth IRA
The 2010 contribution limits for Roth IRA are also unchanged. The 2010 Roth IRA contribution limits are same as those for regular IRA. That is, you have a contribution limit of $5,000 if you are below 50 years of age, but its $6,000 if you are older than 50 years. In case of Roth IRA, there are some income restrictions. Married couples who have a joint IRA account, can contribute $5,000 ($6,000 if 50 or older) if their modified adjusted and combined income is greater falls below $166,000 and lesser if the income falls in the range between $166,000 - $176,000. However, if the modified income of the couple exceeds $176,000, they cannot contribute to Roth IRA. For individuals, the phase out restrictions on contribution limits fall in the range of $105,000 - $120,000. If the income exceeds $120,000, then the person cannot contribute to Roth IRA.

Simple IRA Contribution Limits
The 2010 limits are unchanged. They are $11,500 for individuals aged 49 or below and $14,000 for people aged 50 or more.

Changes in contribution limits are dependent on the economic scenario of the country. Policy decision like these are only made after a thorough study of all the factors.