Roth IRA Income Limits

The Roth IRA income limits make it harder for you to contribute to your Roth IRA if you are a highly compensated employee. The Income limits for Roth IRA are as follows.

Single Filers

If you are single and filer in 2011 you may contribute the maximum amount to your IRA provided you earn under $105,000 a year.

If you earn more than this the amount you can contribute becomes less and less to the point where if you make over $120,000 dollars a year you cannot contribute to your Roth IRA at all.

Roth IRA Income Limits on Joint Filers

If you are married and are filing your taxes with your spouse the amount of money that you can make while still investing into the plan is greater. This is because you are taking care of more people and may need the extra money.

If you joint file your taxes with your spouse the rules are a little different. You can contribute the full amount into your Roth IRA provided you earn less than $167,000 combined for 2011.

Anything above this means the amount you can contribute becomes less and less. If your combined income is over $177,000 then you cannot contribute to your Roth IRA.

Increase in Income

You already know that if you make over the limit above you will not be able to contribute to a Roth IRA plan. But there is another thing that you may be wondering.

What happens if you have a Roth IRA and go over the income limit? If you get a raise or a promotion and have recently gone over the income limit you may be wondering what happens to your old Roth IRA.

Well, if you are over the limit it only affects that year. This means all the money you invested into your Roth IRA previously will remain there and continue to grow; you just cannot contribute anymore money into it and will have to start looking elsewhere to get a tax break and invest for your retirement.

If something changes in the future such as the income limit goes up or you get married then you may be able to contribute to it once again. But until that day it is simply an asset on the side that you can’t add to.

All of these rules are constantly changing to keep up with inflation. But as for my understanding this is how the 2011 rules work with regards to the different limits that they have.

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