2010 Contribution Limits on IRAs, 401-k's, ESAs, and Gifts
If you qualify for an IRA contribution for 2009, you may make a 2009 contribution up until April 15, 2010. The same is true for Coverdell Educational Savings Accounts.
For 2010, most of the contribution limits for IRAs, 401-k, SIMPLE IRAs, SEP/IRAs, Coverdell Educational Savings Accounts, are the same as 2009. Qualifications for contributions are very similar as well.
One major change for 2010 is that anyone may now convert a Traditional IRA to a Roth IRA no matter what your income level.
For 2010, the maximum contributions for Roth IRAs and Traditional IRAs remain $5000 if you qualify for making a contribution. If you are 50 or older, you may contribute up to $6000 if you qualify.
To qualify for a full contribution to a Traditional IRA, a single tax filer needs to have a Modified Adjusted Gross Income (MAGI) of $55,000 or less. A joint filer needs to have a MAGI of $89,000 or less. To figure your MAGI, there is a worksheet provided by the IRS to calculate it. It isn't necessarily your gross income.
In addition to the income limitations, you must have earned income to contribute to an IRA. If you are married, you must file jointly if you plan on making IRA contributions.
Roth IRAs have similar income limits to qualify for a full contribution. A single filer must have a MAGI of $105,000 or less and a joint filer must have a MAGI of $167,000 or less.
If your estimated MAGI for 2010 is close to the limit, you might consider waiting until the first quarter of 2011 to make your contribution. Otherwise, you might have to pull money out if you end up overfunding an IRA.
For company sponsored SIMPLE IRAs, you may contribute $11,500 plus another $2500 if you are 50 or older.
For company sponsored 401-ks, you may contribute up to $16,500 plus another whopping $5500 if you are 50 or older.
For SEP/IRAs, the max contribution of a participant is 25% of their pay or $49,000 whichever is less. What is considered "pay" depends on your company incorporation and if you are considered "self-employed." Your accountant should be able to help you out with determining those fine points for you.
For Coverdell Education Savings Accounts, you may contribute up to $2,000 per year per child until the child reaches the age of 18. Contributions are phased out as the adjusted gross income increases from $190,000 to $220,000 for married couples filing jointly and from $95,000 to $110,000 for individuals.
Gifting: in 2010, you may gift anyone up to $13,000 without paying a gift tax. This is important to consider if making contributions to a child's custodial account or a 529 College Savings Plan. If you gift someone more than $13,000 you will pay a gift tax on your gift, not the recipient.
As a savvy investor, you should be thinking about how your savings rate is on track or not for hitting your retirement goal or college funding goals. Simply contributing to a retirement plan or IRA does not guarantee that you will have enough to live on in retirement. Your retirement goals may require more funding than maxing out a retirement plan can provide for you down the road. Let me know if you would like for me to update a retirement analysis for you.
|