Updated for 2019: One of the best ways to save for retirement is with an Individual Retirement Arrangement, or IRA.
Because of the great tax advantages, the IRS created maximum IRA contribution limits on IRAs. These caps are set by Congress and can change from time to time.
Taxpayers will be able to contribute up to $6,000 to an IRA in 2019, the first IRA contribution limit increase since 2013.
In addition to the contribution limit increase, there were some additional changes to the income limits for deductions for Traditional IRAs, and changes to the Roth IRA income eligibility limits.
This article covers all you should need to know about 2019 IRA Contribution and Deduction Limits.
Need to learn more about Roth Withdrawal Rules? We can help with that, too!
Traditional and Roth IRA Contribution Limits
The Traditional and Roth IRA contribution limits are $6,000 for those under age 50. Persons age 50 and over can make additional catch up contributions of $1,000, for a total contribution limit of $7,000.
You can have both a Roth IRA and a Traditional IRA in the same tax year, but you can’t exceed the contribution limit with your combined contributions to both accounts.
In other words, the contribution limit is per person, not per account.
Self-employed retirement plans may have different rules, so be sure to read up on the different self-employment tax plans or check with your accountant or financial advisor.
Current & Historic IRA Contribution Limits
|Tax Year||Contribution Limit Age 49 & Below||Catch-up Contribution Limit Age 50 & Above||Contribution Limit Age 50 & Above|
|2006 - 2007||$4,000||$1,000||$5,000|
|2002 - 2004||$3,000||$500||$3,500|
Traditional IRA Deductions and Roth IRA Eligibility Phaseouts
The IRS has specific rules regarding who can contribute to an IRA. Traditional IRAs and Roth IRAs base certain eligibility guidelines on the taxpayer’s Modified Adjusted Gross Income (MAGI), which is calculated when you file your taxes.
2019 Traditional IRA Deduction Income Limits
The IRS imposes income limits for those who are able to make a tax-deductible contribution to their Traditional IRA account. Those who earn less than a certain amount (detailed below) are able to deduct 100% of the contribution.
There is a phase-out that allows participants to deduct a lesser amount than the full contribution level. The partial deduction can still be valuable, depending on your situation. Participants who have a Modified Adjusted Gross income greater than the highest level are not able to take a deduction on their contributions.
|2019 Traditional IRA Deduction Limits|
If Your Filing Status Is...
|And Your Modified AGI Is...||Then You Can Take...|
|Single or Head of Household||$64,000 or less||a full deduction up to the amount of your contribution limit.|
|more than $64,000 but less than $74,000||a partial deduction.|
|$74,000 or more||no deduction.|
|Married Filing Jointly or Qualifying Widow(er)||$103,000 or less||a full deduction up to the amount of your contribution limit.|
|more than $103,000 but less than $123,000||a partial deduction.|
|$123,000 or more||no deduction.|
|Married Filing Separately||less than $10,000||a partial deduction.|
|$10,000 or more||no deduction.|
|If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "Single" filing status.|
- Single or Head of Household can deduct the full amount of their contribution their MAGI is $64,000 or less. Deduction rates phase out beginning at a MAGI above $64,001 and end at $74,000 (up from $63,000, and $73,000, respectively in 2018). There is no tax deduction for those who have an income higher than $74,000.
- Married Filing Jointly can make maximum Traditional IRA contributions for an income of $103,000 or less. Traditional IRA eligibility ends at $123,000. (up from $101,000 and $121,000, respectively in 2018). There is no deduction for taxpayers who have an AGI of greater than $123,000.
- Married Filing Separately deductible contributions begin to phase-out with MAGI of $0, and are completely phased-out one MAGI exceeds $10,000.
2019 Roth IRA Eligibility Income Limits
Like the Traditional IRA, the IRS has phase-out rules for Roth IRA contributions. Tax filers will be able to contribute the maximum amount to their IRA if they don’t exceed certain income limits.
|2019 Roth IRA Income Limits|
If Your Filing Status Is...
|And Your Modified AGI Is...||Then You Can Contribute...|
|Married Filing Jointly or Qualifying Widow(er)||$193,000 or less||up to the limit|
|more than $193,000 but less than $203,000||a reduced amount|
|$203,000 or more||Zero.|
|Married Filing Separately and You Lived with Your Spouse at Any Time During the Year||less than $10,000||a reduced amount|
|$10,000 or more||Zero.|
|Single, Head of Household, or Married Filing Separately and You Did Not Live with Your Spouse at Any Time During the Year||$122,000 or less||no deduction.|
|more than $122,000 but less than $137,000||a partial deduction.|
|$137,000 or more||Zero.|
- Married Filing Jointly can make maximum Roth IRA contributions for an income of $193,000 or less. Roth IRA eligibility ends at $203,000. (up from $189,000 and $199,000, respectively in 2018).
- Single or Head of Household can contribute the maximum if their MAGI is $122,000 or less. Contribution rates phase out beginning at a MAGI above $120,001, and end at $137,000 (up from $120,000, and $135,000, respectively in 2018).
- Married Filing Separately contributions begin to phase-out with MAGI of $0, and are completely phased-out one MAGI exceeds $10,000.
These income limits apply to everyone, regardless of age, however, those age 50 and above can contribute an additional $1,000 per year as catch-up contributions. You only need to be age 50 or older for one day during the calendar year to be eligible for the catch-up contributions.
For specific questions, please see IRS Pub 590.
IRA Contributions Are Separate from 401k Contributions
Many investors want to know if they can contribute to both an IRA and a 401k in the same year. Yes, you can. 401k plans are an employer-sponsored retirement plan, and contributions must be made from payroll deductions. IRAs are an individual investment (hence the name Individual Retirement Arrangement).
401k plans have their own annual contribution limits, which aren’t based on income like IRA contribution limits. Like IRA limits, the IRS assesses 401k contribution limits each year and reserves the option to increase the limit. Similar to IRAs, 401k limits are per individual, not per account. So you can’t max out a 401k plan with an employer and switch to a new plan part way through the year and max that out as well.
In addition to a 401k and IRA, it may be possible for investors to have multiple retirement accounts they participate in each year.
Best Roth IRA Companies
With all the IRA contribution guidelines in mind, you may be wondering about the best places to open a Roth IRA.
Of all of the investment companies you could do business with, the following are my top three choices for opening a Roth IRA, in no particular order.
- Betterment- Fairly new to the investing game, Betterment is now the nation’s leading robo-advisor platform, and it couldn’t be simpler to use. You simply make an account, share your retirement goals and risk level, and let Betterment do the work. Rather than a living, breathing financial advisor, Betterment uses an algorithm to manage your portfolio. Since a person isn’t being paid to manage your funds, Betterment’s fees are low. If you’re new to investing or looking for a Roth IRA that requires little input from you, Betterment is an excellent bet.
- Ally Invest– Ally gives you the best bang for your buck when it comes to banking and investment brokerages. One of the best high-yield online banks, Ally recently merged with TradeKing, who I’ve been a client of for over a decade. With $4.95 stock trades, zero custodial fees, and no minimum balance requirement for Roth IRA accounts, Ally Invest is a fantastic choice for your Roth. You also get free access to Ally’s tax manager software, trading tools, and a community sharing platform with tips from investors worldwide.
- TD Ameritrade– With TD Ameritrade, you get an established company you can count on, with the reviews, results, and awards to back it up. Without maintenance fees or a required minimum balance, TD Ameritrade is one of the most rewarding options for your Roth IRA. You’ll get more than 100 commission-free ETFs and a flat $6.95 commission on internet equity trades. TD Ameritrade has over 100 local branches, giving you even more access to their services, in addition to a host of free online tools.
Get your retirement savings rolling today by opening your Roth IRA with one of the companies above.
Want to Save Even More for Retirement? Open an HSA
Savvy investors who are looking to save even more money for retirement take their retirement investing to a new level by opening a Health Savings Account and maxing out their HSA contributions. On the surface that may not seem related to investing, but HSAs have three very powerful tax benefits.
The first is the ability to get a tax deduction in the year you make the contribution, much like a Traditional IRA. The second is that your withdrawals are tax exempt if you make them for qualified medical expenses (bonus: there is no time limit for these withdrawals).
The final and most valuable benefit is the ability to invest the funds in your Health Savings Account, and make withdrawals once you reach retirement age.
Withdrawals during retirement are taxed as income, but you don’t pay any early withdrawal penalties. This is an advanced investment strategy and worth exploring if you are already maxing out your IRA and 401k plans, and you still have money to invest in a tax-deferred account.
Here is more information about investing in a Health Savings Account.
IRA Contribution Deadlines
You can make IRA contributions for the previous tax year up to the tax filing deadline of the current year. For example, you can make a contribution for the 2018 tax year until April 15, 2019.
If you make an IRA contribution between January 2 and the tax deadline, you should designate which tax year your contributions are for, as you can also contribute to current year IRAs during the same time frame.
Get started investing in your future today!