IRA Contribution Limits
A look at the world of Roth IRA limits and more investment details about these retirement plans.
Knowing the IRA contribution limits each year, as they fluctuate, is extremely important to managing your account. Only by knowing the limitations on what you’re allowed to set aside, can you be sure that you aren’t violating the law, with the amount of money that you’re setting aside. Because an IRA is a special account that gives you a ton of tax breaks, and other advantages, in order to provide you with a retirement savings plan, the government imposes limitations on how much you can donate. That way, they can ensure that you’re not mistreating the system, or misusing your IRA. But you want to be sufficiently informed about the IRA contribution limits in effect that year, so that you can be sure you don’t fall victim to any pitfalls. That way you can avoid any penalties, from a legitimate mistake.
It’s first important to understand why IRA contribution limits are imposed. In most cases, this is to ensure that nobody takes advantage of the system in place. IRAs are designed to provide you with a bank account that the government can’t tax, that you can use for investing or saving for your retirement. On average, you gain 4 to 5% of the money that you put in, so that you can be sure you’re always gaining money on a yearly basis, for you retirement. However, because of these great benefits, there is a cap to how much you can put in the bank yearly, and also there are very severe fines if you access your IRA before you reach retirement age.
In order to know the IRA contribution limits, you have to know what type of account that you have. Different types of accounts have different limitations. Usually employer run IRA accounts have very high limitations, because you’re usually putting into the account automatically, and your employer is free to donate money as well. For that reason, you can expect a fairly high limitation. But on personal IRAs, the limits are usually much lower, and on most it’s at least half what an employer offered IRA would be. Also, if you have a Roth IRA, you can expect to be only able to put in $5,000 to $6,000 every year.
Of course, it’s also important to realize that the IRA contribution limits that are imposed every year can fluctuate, so you always want to check the rates for that year. This is essential, so that you can be sure you know how much you can put in, so that you don’t have to be afraid of not putting enough money into your IRA, and also so that you can avoid putting in too much and suffering a penalty. Usually you can freely find this information through websites like the official IRS site at IRS.gov.
One of the best ways to ensure you never exceed IRA contribution limits, is to ensure that you have a trusted investment firm to manage your investments. That way, you can be sure that they are well versed in all of the IRS restrictions, so that you never have trouble.