Purchase Order Finance

If you are saving for retirement or the purchase of a new home, an IRA can be a valuable holding place for your money to collect and grow. Once you make a contribution, your money will grow without being taxed. You can also make tax-free withdrawals, which is where a Roth account has its advantage over a traditional Roth account. So, here is the answer to the all-important question: how much can I put in my Roth IRA?

If your saving are only for retirement, you can start making tax free withdrawals after you reach 59. 5 years old. If you choose to withdrawal before this age, you have to meet certain criteria. One way is to become officially disabled. Another option is to use the withdrawal toward your first home, or the first home for your children or grandchildren. These withdrawals are still tax free.

This makes it easier to get your money out when you need it, but there are limits on what you can contribute in a given year. The guidelines are based on your income for the year and your age. If you are over the age of 50 you will be able to contribute a little more than those under 50.

For 2009, the income cap for Roth IRA contributions is $105, 000 for if you file your income taxes as a single individual, or $166, 000 if you file married or jointly. This means you have to make less than this amount in order to contribute to a Roth.

Further guidelines on contributions regard the maximum amount you are able to contribute over the course of the year. For a single individual filer under the age of 50, the maximum allowed contribution for 2009 is $5, 000. For a single filer over 50, the maximum contribution is $6, 000. The extra $1, 000 comes from a special rule that allows older contributors to make a catch up contribution in this amount.

These figures for maximum contributions are made with the assumption the person has earned more than that amount in the year. For those who earn less than $5, 000 in the year, only the amount they actually earn can be legally contributed.

For those who file as a married couple or otherwise file jointly, you can contribute up to $10, 000 a year. This is a combined figure. If you earn less than this amount together, you can only contribute the amount of your real income or less.

Remember the catch-up contribution for anyone over the age of 50, which allows for an extra $1, 000 contribution per contributor. For a married couple, this means a joint filing couple could put in up to $2, 000 more combined. This is given both parties are over the age of 50.

These rules do restrict the amount of money you can save and ultimately earn in a Roth IRA, but for many people they are worthwhile accounts due to the ability to make tax free withdrawals before the age of retirement is reached.

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