Ask Kim
Bigger IRA Contibutions for the Over-50 Set
What is the limit for 2003 Roth contributions? I am 55 years old.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
August 27, 2003
What is the limit for 2003 Roth contributions? I am 55 years old.
Because you're over age 50, you can tack an extra $500 catch-up contribution onto the $3,000 per-year IRA contribution cap. That means you can sock away up to $3,500 this year if you meet the Roth IRA's income tests.
Married filing jointly:
You can only contribute the full amount to a Roth if your adjusted gross income is less than $150,000. If you earn between $150,000 and $160,000, your contribution amounts are reduced -- the more you earn, the less you can contribute. If your AGI is above $160,000 you cannot contribute to a Roth at all.
Single or head of household:
You must earn less than $95,000 per year to qualify for the full contribution. Contributions phase out between $95,000 and $110,000. And you cannot contribute to a Roth if your AGI exceeds $110,000.
If you are married and file seperately, the phase-outs and cut-offs will depend on whether you live with your spouse during the year.
Like just about every tax calculation, finding out exactly how much you can contribute if you fall inside the phase-out range is a bit complex. You can get a step-by-step explanation on page 54 of IRS Publication 590, Individual Retirement Arrangements.
The contribution limits are scheduled to jump up to $4,000 in 2005 and $5,000 in 2008. And the catch-up amount will increase to $1,000 in 2006.
For more IRA fundamentals, see An IRA Owner's Manual.
You may also be able to make catch-up contributions to your 401(k) plan. Most folks can contribute up to $12,000 to a 401(k) in 2003, but people age 50 or older can contribute up to $14,000 (some employers have lower limits, however, for highly compensated employees). The catch-up amount rises to $3,000 in 2004, $4,000 in 2005 and $5,000 in 2006.
Contribution limits are also rising for all 401(k) participants -- to $13,000 in 2004, $14,000 in 2005 and $15,000 in 2006.