If you have been thinking about retirement lately, chances are that your research has led you to various types of retirement account options. Almost anyone will tell you that the old idea of saving money in a bank account is simply a thing of the past. The interest you earn on most savings accounts can barely keep pace with the inflation rate and loss of purchasing power over time. A IRA account, on the other hand, offers tax incentives as well as sound investment returns to those who own them. It is important to know, however, whether you meet the current IRA income limits.

Various limits in place

Anyone familiar with Roth IRAs – or even traditional IRAs – knows that the accounts come with varying degrees of restrictions. There are limits on both the amounts you can contribute to the account, and the income that you can earn while still being eligible to own a IRA. These Roth-IRA income limits might mean that you are not eligible to contribute to one of these retirement accounts, depending upon the level of your earnings. With respect to contribution limits, the total contribution that you can make to your Roth IRA cannot exceed a total of $6,000. This amount includes $1,000 in so called “catch-up” contributions for anyone turning 50 this year.

Income limits

As of 2010, there are strict rules in place for Roth-IRA income limits. These limits are designed to ensure that the Roth accounts remain a viable method of retirement investment for people under a certain income level. This is based on a year to year calculation of income. If, for example, your adjusted income for 2009 was more than $105,000, you are not eligible to contribute the total amount possible to your Roth IRA during the calendar year 2010. For joint income tax filers, that amount is $167,000. These Roth IRA income limits do allow both groups to contribute a portion of the maximum amount, however. For singles, they can contribute some amount less than the maximum until their income reaches $120,000. Joint filers can do so until they earn $177,000.

Conversion changes

One major change that has occurred in recent years is the ability of traditional IRA owners to convert their IRA into a Roth IRA. The old rules placed Roth IRA income limits on the conversion guidelines as well, and required you to earn less than $100,000 to qualify for such a conversion. The new rules allow all account owners to convert from traditional to Roth without penalty.

Understanding how these Roth IRA income limits can affect your ability to contribute to the IRA of your choice is an essential part of your retirement planning. If your income is in excess of the amounts permitted by rule, there is little sense in making the IRA your retirement plan of choice. If, however, you meet the Roth IRA income limits, then this type of retirement planning vehicle can be the perfect way for you to ensure that you and your family are secure when your career reaches its inevitable end.

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