IRA Contribution Limits: How Much Can You Invest?

If you have any type of IRA account, you have to check the new IRA contribution limits for every new year. As the cost of living in the country as a whole rises, so will the limits for these contributions. While limits remained the same for some time in the past, this started to change in 2008.

The new higher contribution limit for the year 2008 was $5,000, and that remains in effect for 2009. This increase was passed because of considerable changes in the national cost of living. There are some other things that investors must consider before taking that amount as their personal limit.

This maximum limit is a combined figure for all IRA accounts owned by a single person. That means someone who has three different IRAs will have to invest no more than their maximum amount into all three accounts combined.

For investors who are 50 years old or above, the maximum IRA contribution limit is actually $6,000 a year combined. This is due to a "make up contribution" which allows those closer to retirement to contribute an extra $1,000 per individual per year.

This is also a combined contribution which just increases the total contribution limit for the entire year for anyone within this age category.

Depending on how much money a person makes in a year, there could also be phase out requirements that enforce a lower limit than stated here. Phase out guidelines are set to limit contributions from people who make higher amounts of money, with a maximum income for each type eliminating some people from contributing altogether.

Since there are different phase out income guidelines for different types of IRA plans, investors must seek out the guidelines for the type of accounts they have. These figures are important because they can change the maximum IRA contribution limits for some people. Make sure that you follow these rules carefully, as not contributing enough will slow your retirement savings, and over contributing will result in penalty.