With several different options with Individual Retirement Accounts (IRAs) available in the United States, choosing the right one often depends on understanding the terms related to each one, including the annual IRA limits on contributions. In fact, each of the three main IRA account types do have specific limits in terms of both contributions and withdrawals. Since those limits are subject to change on an annual basis, investors should always consult financial professionals to determine if limits have been increased or modified in any way, since those adjustments may change the account holder’s tax liability for the calendar year.
Currently, the traditional IRA limits have remained stable for a couple of years. For individuals who are under the age of fifty, the maximum annual contribution is $5,000 US dollars (USD). Anyone who is over the age of fifty as of the end of the current tax year may contribute an additional $1,000 USD for that year, and every year after that. Keep in mind these figures represent cumulative contributions to IRA plans. This means that if the individual participates in two different IRAs, the combined contributions to the two plans could not exceed that $6,000 USD figure.
In like manner, Roth IRA limits have also remained constant in recent years. The maximum annual contribution limits are similar to those associated with a traditional IRA. The difference is that this type of Individual Retirement Account does carry some additional restrictions in terms of the total amount of income generated by the individual or couple using this IRA format. Depending on the amount of adjusted annual income involved, the account holder or holders may not be eligible to make contributions during that particular year.
Simple IRA limits are among the most liberal currently provided. With this type of Individual Retirement Account, individuals who are under age 49 or younger may contribute up to $11,500 USD per tax year. If the account holder reaches the age of 50 during a given tax year, he or she may contribute up to $14,000 USD for that year and every year thereafter up to the point of retirement.
Similar retirement plans in other countries utilize guidelines that are much like those used for IRA limits in the United States. For example, the Individual Savings Account or ISA that is offered in the United Kingdom is structured with options that are much like their US counterparts. In other nations around the world, especially in countries where employer provided pension plans are either being limited or eliminated altogether, retirement savings plans of this type are gaining in popularity. Before opening an IRA or similar account, take the time to look closely at the individual financial situation, and choose the plan that will provide the most benefit during the retirement years.