IRA Contribution Limits

An Individual Retirement Account (IRA) is an excellent way to save for retirement.

(PRWEB) February 3, 2005 -- An Individual Retirement Account (IRA) is an excellent way to save for retirement especially if your job does not offer a retirement plan, or if you are unable to open a self-employed 401k with a loan feature, according to the retirement plan specialists at Lamaute Capital, Inc (www.Investsafe.com).

The main advantages of the IRA are that it allows tax-deferred growth, and if you qualify, your contributions may also be tax-deductible.

You may contribute to both a traditional IRA and a Roth IRA as long as your contributions do not exceed the total IRA contribution limits. For 2004, the limit is $3,000 ($3,500 if age 50 or older). The IRA contribution limits increase to $4,000 ($4,500 if age 50 or older), for 2005. You may contribute to an IRA even if you have contributed to a 401(k) or other retirement plan.

IRAs can be established by anyone under 70 1/2 years old with earned income at least equal to their IRA contribution amount. However, you are allowed to open an IRA for a non-working spouse with no income. To establish a spousal IRA the husband and wife must file a joint income tax return and the receiving spouse must have less compensation than the contributing spouse.

IRA contribution limit (traditional and Roth IRAs):
Tax year 2004         $3,000
Tax year 2005         $4,000

Catch-Up (50 year and older)
Tax years 2004 and 2005         $500

Traditional IRA - Income phase-out range for determining tax deductibility:

• For individuals covered by an employer-sponsored plan and filing as:

Single
Tax year 2004         $45,000 - $55,000
Tax year 2005         $50,000 - $60,000

Married filing jointly
Tax year 2004         $65,000 - $75,000
Tax year 2005         $70,000 - $80,000

Married filing separately
Tax years 2004 and 2005      $0 - $10,000

• For individuals not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by an employer-sponsored retirement plan

Tax years 2004 and 2005     $150,000 - $160,000

Income phase-out range for determining ability to fund Roth IRA:

• Single

Tax years 2004 and 2005      $95,000 - $110,000

• Married filing jointly

Tax years 2004 and 2005      150,000 - $160,000

• Married filing separately

Tax years 2004 and 2005      $0 - $10,000

• Annual income limit for determining ability to convert traditional IRA to Roth IRA

Tax years 2004 and 2005         $100,000

Lamaute Capital (www.investsafe.com) describes methods to make early withdrawal of deductible contributions from retirement plans that will not result in 10% tax penalty. Tax laws and regulations are complex and subject to change. Please consult an attorney or tax advisor about your particular situation