How Much Can You Contribute to a Roth IRA in One Year?

A Roth IRA is a tax-advantaged retirement savings vehicle. Roth IRAs are popular because you can withdraw your principal contributions at any time without penalty. Once you reach 59 ½ years of age, withdrawals can be made tax free. Additionally, there are no mandatory withdrawal stipulations once you reach the age of 70 ½. All of these items makes Roth IRAs an attractive choice when considering saving for retirement. However, due to the tax-advantaged status, the IRS puts limits on how much can be contributed each year.

Standard Contribution

• For tax year 2010, you can contribute up to $5,000 to your Roth IRA account. These contributions can be made at any time during the tax year and in any amount. Additionally, you may opt for any contributions made between January 1, 2011 and April 15, 2011 to count towards your 2010 $5,000 contribution limit. You may also contribute up to the $5,000 to your spouse's Roth IRA, regardless of earned income for the year, provided you file a joint tax return. In 2011, the amount that can be contributed to your IRA will increase to $5,000 plus an additional allowance for inflation.

Catch-Up Contribution

• If you are over the age of 50 and missed out on putting money away into your IRA over the years, the IRS allows you an additional catch-up contribution of up to $1,000 for tax year 2010. This is in addition to your standard contribution made during the tax year. If you qualify, that would make your total contribution limit $6,000 for 2010. Tax year 2011 limit for catch up contributions will also adjust to accommodate inflation.

Income Restrictions

• Since Roth IRAs are tax-advantaged, limits exist on how much you can earn to be eligible to contribute to a Roth IRA. Your eligibility is determined by your filing status -- single or married -- and your modified adjusted gross income, or MAGI, levels. MAGI is your total gross income less allowable deductions and exemptions as provided by the IRS. For tax year 2010, if your MAGI is above $177,000 for married tax filers or $120,000 for single tax filers, you are no longer eligible to contribute to a Roth IRA.

Contribution Limit Phase Out

• For married filers earning between $167,000 and $177,000 and single filers earnings between $105,000 and $120,000, contributions limits are subject to being phased out. That is, if your MAGI and tax filing status falls between these ranges, you can contribute to your Roth IRA, but the amount will be a percentage of the maximum contribution limit based on your income and tax status.

Conversion

• If you hold retirement assets in other vehicles like a Traditional IRA or 401(k), you may be eligible to convert these assets into your Roth IRA. Any of these rollover or conversion additions to your Roth IRA are not part of the contribution limits. So, if you have $50,000 in a Traditional IRA and you convert that to a Roth IRA, you can still contribute the $5,000 in addition to this conversion amount. Conversions, however, should not be considered contributions and are a separate financial planning issue with additional tax implications.