How Much Can I Put in My Roth IRA

"How much can I put in my Roth IRA?" is a common question after you discover how to open a Roth IRA account. The prospect of opening an Roth IRA account is exciting, especially when you consider the long-term benefits it provides. It is understandable that you would like to invest a large chunk of your available savings into a Roth IRA account as soon as possible. Unfortunately, there are limits to how much you can contribute to Roth IRAs, and those limits fluctuate yearly. Understanding your investment limit will better equip you to handle your money and your retirement.

What Is a Roth IRA?
IRA stands for "Individual Retirement Account." Roth stands for the senator, William Roth, who sponsored the retirement plan. The main difference between a traditional IRA and a Roth IRA is when you pay taxes. In a traditional IRA, you pay taxes when you withdraw your money. If you reach a higher tax bracket by the time of your retirement, you will pay significantly higher tax rates. In a Roth IRA, you pay taxes at the time of investment. The benefit to a Roth IRA is that your taxes will be much lower because you will have already paid the taxes by the time you withdraw, and your income bracket won't matter.

How Much Can I Invest?
The amount you can deposit into your Roth IRA fluctuates almost yearly. As of 2009, the amount you can invest annually is $5000. If you are over the age of 50, you can invest an additional $1000 per year. This additional $1000 is called a catch-up contribution.

Roth IRAs come with a fair amount of restrictions. Contributors must not exceed a specific dollar amount for their annual Adjusted Gross Income. In 2009, for singles, the Adjusted Gross Income maximum is $105,000. For married couples, the maximum is $166,000. If a person or couple exceeds this income limit, they may still be eligible to invest in a Roth IRA account, but at reduced contribution amounts. However, if the Adjusted Gross Income far exceeds the maximum, a person may be completely ineligible to contribute.

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