2008 IRA Contribution Changes

As April 15, 2008 (deadline for 2007 IRA contribution) approaches, people looking to add more to their IRA should be aware of the contribution limit changes for 2008. Contributors that are 49 and below will see their yearly contribution maximum increase from $4000 to $5000. Then for those above 50 years of age, their maximum contribution climbs from $5000 to $6000.

IRA Contribution Year Max Contribution (Age 50 and Under) Max Contribution (Above age 50)
2007 $4000
$5000
2008 $5000
$6000

Can I contribute to both Traditional and Roth IRA?

Yes, you can contribute to both types of IRAs in a given year but you cannot contribute the yearly maximum toward each of the IRAs separately. Therefore if you are 35 years old, your maximum IRA contribution is $5000 in 2008. You can put in $3000 into a Traditional IRA and $2000 into a Roth IRA (which totals $5000). What you can’t do is put $5000 in both the Tradition and Roth accounts.

What part of the year is the best time to contribute to an IRA account?

Ideally, as early as possible. If you want to fund your 2008 IRA as early as possible, it would have been best to do so on January 1, 2008. The earlier you finance your IRA, the earlier you can start to invest your money and let it compound and grow. Due to financial constraints, sometimes people have other financial obligations they need to handle (like student loans, mortgages, or car payments) before deciding how much they can afford to add to their retirement account.

Are there any eligibility limitations to contribute to a Roth IRA?

Yes there is. The tables below details what scenarios for 2008 and 2007 that you can are allowed to contribute a full Roth IRA amount, partial contribution, or even ineligible. Totals are based on adjusted gross income (AGI).

2008 Roth IRA Eligibility:

Marital Status Eligible for Full Contribution
Partial Contribution Allowed Ineligible
Single <$101,000 Between $101,000 – $116,000 >$116,000
Married Filing Jointly <$159,000 Between $159,000 – $169,000 >$169,000

2007 Roth IRA Eligibility:

Marital Status Eligible for Full Contribution
Partial Contribution Allowed Ineligible
Single <$99,000 Between $99,000 – $114,000 >$114,000
Married Filing Jointly <$156,000 Between $156,000 – $166,000 >$166,000

How much is meant by Roth partial contribution?

Please refer to chapter 2 (page 63, worksheet 2-2) of the IRS publication 590 on the 11 step calculation to see how much partial contribution you’re allowed if you meet that Roth IRA stipulation.

Since the IRA limits are increasing in 2008, you will have much more flexibility, so take that into consideration as you fund your 2007 contribution (if you haven’t already).

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2 Responses to 2008 IRA Contribution Changes

  1. bumscientist says:

    What is meant by partial contribution? How much is partial?

  2. haystackfarmer says:

    Thanks for the question! I just edited the article and you can see that information below the Roth eligibility tables and click for publication 590 for further calculation assistance.

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