Roth IRA Contribution and Income Limits (2011 & 2012)

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In response to The Ultimate Guide to Traditional and Roth 401(k) and IRA Retirement Accounts, a reader recently asked the following question:

I retired 12/31/2010. I received my last pay check in 01/2012. Can I put money into my Roth IRA in 01/2012 (up to the amount of my gross or net income)?

When it comes to tax questions, it’s always safest to seek the advice of tax professional. But I always do my own research, too. And the starting point for this question is to understand the Roth IRA contribution and income limits.

2011 Combined Traditional and Roth IRA Contribution Limits

According to the IRS, the maximum amount that can be contributed to a traditional or Roth IRA in 2011 is as follows:

If you are under 50 years of age at the end of 2011: The maximum you can contribute to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2011. You can split this between a traditional IRA and a Roth IRA if you want, but the combined limit is still $5,000.

In addition, the maximum deductible amount you contribute to a traditional IRA (2011 and 2012) and the maximum amount you contribute to a Roth IRA may be reduced depending on your adjusted income (see below).

If you are 50 years of age or older before the end of 2011: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 or the amount of your taxable compensation for 2011. This limit can be split between a traditional IRA and a Roth IRA but the combined limit is $6,000. The maximum deductible contribution to a traditional IRA and the maximum contribution to a Roth IRA may be reduced depending on your modified adjusted gross income.

2011 Roth IRA Income Limits

Before you get too excited about a Roth IRA, remember that your income can disqualify you. To determine your eligibility, you need to know your modified AGI and filing status. Plus, the income limits typically change every year with inflation. For 2011, the Roth IRA contribution limit is phased out based on the following income levels:

• For married filing jointly or qualifying widow(er) your contributions well begin phasing out if your modified AGI is at least $169,000. You cannot make a Roth IRA contribution at all if your modified AGI is $179,000 or more.
• For single or head of household filers (or married filing separately and you did not live with your spouse at any time in 2011), your contributions begin to phase out if your modified AGI is at least $107,000. You cannot make a Roth IRA contribution if your modified AGI is $122,000 or more.
• Finally, if your filing status is married filing separately (you lived with your spouse at any time during the year), contributions begin to phase out if your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

2012 ROTH IRA Income Limits

For 2012, your Roth IRA contribution limit is reduced (phased out) in the following situations.

• Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $173,000. You cannot make a Roth IRA contribution if your modified AGI is $183,000 or more.
• Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2012 and your modified AGI is at least $110,000. You cannot make a Roth IRA contribution if your modified AGI is $125,000 or more.
• Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

If you want to open an IRA account, I think Betterment is worth serious consideration. If you want to trade individual stocks and ETFs in your IRA, check out our list of IRA discount brokers.

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Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

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