Traditional and Roth IRA Contribution Limits for 2014

traditional roth ira contribution limitsThe 2014 IRA contribution limits remained stagnant from last year to this year.

Traditional IRA and Roth IRA

These Individual Retirement Arrangements or Accounts (IRAs) were created to provide a tax incentive to save for your own retirement. They are both excellent tools to help you in your efforts to secure a comfortable retirement. I have both types of accounts and I can tell you they are easy to setup and maintain: very similar to savings accounts. Contributions to your traditional IRA are generally tax deductible in the year you made the contribution. Contributions to a Roth IRA are not tax deductible, but the qualifying distributions you make from it are free from taxation. Because of these two advantaged, the IRS imposes annual limits on the contributions you can make to these accounts.

The Contribution Amounts Are Per Person and Split Across Accounts

A couple of points before we look at the contribution limits. First, there is no such thing as a joint IRA account. You, and you alone are assigned to your IRAs. Not your kids, not your spouse. Just you. Also, you can have multiple IRAs. You can have as many traditional and Roth IRAs as you would like. However (and this is the important part) your contribution limits are applied to your contributions across all accounts. For example, let’s say you have a traditional IRA, a traditional (Rollover) IRA, and a Roth IRA. You can only contribute up to the limit, split across all accounts in total. Now let’s look at those limits for the current year:

For Those That Will Be Under 50 at the End of 2014

The maximum that you are able to contribute to a traditional or Roth IRA is going to be the lesser of $5,500, or the dollar amount of how much you made (your taxable compensation) for the year. In other words, you can’t contribute more than you earned. I’m so glad to see this being bumped up by $500 from the year before. It’s been a while since we’ve seen an increase. Also, keep in mind that your annual income can reduce the amount you are able to contribute to your IRAs. See my exhaustive rundown of the Traditional and Roth IRA income limits.

Catch-Up Contribution (50 Years of Age or Older at the End of the Year)

Because IRAs haven’t been around that long, and just because it’s a nice gesture (I guess), if you are 50 or older, you can contribute “catch-up” contributions to an IRA. So, if at the end of this year you are 50 or older, you can contribute the lesser of $6,500 or the dollar amount of how much you made (your taxable compensation) for the year. These contributions are also limited by your income. See IRS Publication 590 for all the dirty details.

Contribution Limit Table Showing Previous Year Contribution Limits

Let’s take a look at how the annual contribution limits have changed over the years. As, you can see, we’ve been holding pretty steady at current levels for quite some time. Back in the early oughts we got used to frequent increases. Now we have seen a significant slow down in the increases.

Tax Year
Contribution Limit
Catch-Up Limit
2014
5,500
6,500
2013
5,500
6,500
2012
5,000
6,000
2011
5,000
6,000
2010
5,000
6,000
2009
5,000
6,000
2008
5,000
6,000
2007
4,000
5,000
2006
4,000
5,000
2005
4,000
4,500
2004
3,000
3,500

Why These Limits Matter

Use these contribution limit numbers to help you plan your retirement savings this year. If your goal is to reach the maximum (a great idea), then be sure to set up automatic contributions to your IRA to ensure that you get it done. You don’t want to be waiting till the end of the year (or the date you file your taxes) to start thinking about contributing. Happy saving!

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Last Edited: March 12, 2014 @ 2:27 pm
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

7 comments
rwohlner
rwohlner

Good reminder Phil.  One other situation to mention is the spousal IRA.  A non-working spouse whose working spouse earns at least enough income to cover the IRA contribution can contribute to an IRA even if they earn no income.  A nice retirement savings feature for those in this situation.

snarky
snarky

We are a couple in our mid- 50's. we have saved some $ but not in IRA accounts. . Perhaps not the best decision as now (after one 5K trip to the ER and no health ins) we find our life savings vulnerable to possible future health problems!!  My question now is, since there is a $2000 limit to the Savers Credit and if we want to open a ROTH, WHY is there such a small "catch-up" contribution limit??  If the Gov really want us to save for our retirement (especially when it's so close-at-hand) wouldn't they offer a one time catch-up where folks like us could start our ROTH with as much as we have saved?? Anybody know why the small limits and/or any way around them? Thanks

Adaptu
Adaptu

Thanks for sharing this table with us!

Philip Taylor
Philip Taylor

@Mike - Thanks for stopping by and adding your opinion. I agree that the more I look at it, the more I like the Roth IRA. Or maybe the older I get, the more I like it cause I think about those future tax savings.

Mike
Mike

Good article on the basics of Traditional and Roth IRAs. I guess the moral of the story is to max out your Roth IRA if you are eligible since the income within your Roth will be tax free upon withdrawal, after 59 1/2 years old. The only catch is that you don't get the tax deduction for your contribution on your tax return, but assuming that you will be in a higher tax bracket upon withdrawal than you are now, it should make sense to contribute. Nice @PTMoney! I need to bookmark your site for future reading.

Working Mom of 2
Working Mom of 2

In "The Gospel of Roth- The Good News About Roth IRA Conversions and How They Can Make You Money" by John Bledsoe it clearly states in the book that NO ANALYSIS is needed and that everyone should convert to a Roth IRA regardless of income. There is NO risk! The IRS is giving us a year to recharacterize or "undo" the conversion. This book gives the ins and outs for Roth IRAS! It really helped answer all my questions.

Alan
Alan

That is not just a "catch"...it is the reason why you should NOT choose a Roth. I ran a NPV on both options and assuming my tax rates increase half a percent each year until I'm 70 (when it will be 39%) I lower my total taxes paid by using the Traditional IRA. The result is the same if I assume my taxes stay the same.

rwohlner
rwohlner

@Working Mom of 2  When someone says "There is NO risk!" I'd think about checking to make sure my wallet is still there.  I'm not familiar with the author or this book but anyone who says the conversion decision is a no-brainer really has no idea what they are talking about in my opinion.