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IRAs (including Education IRA)
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IRAs
How Much Can You Contribute to an IRA?
Maximum Annual IRA Contributions To a Roth IRA or Traditional IRA |
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| Tax Year |
Maximum Annual
Contributions |
If You're 50+, You Can
Contribute an Additional |
| 2001 |
$2,000 |
$0 |
| 2002-2004 |
$3,000 |
$500 |
| 2005 |
$4,000 |
$500 |
| 2006-2007 |
$4,000 |
$1,000 |
| 2008 |
$5,000 |
$1,000 |
| How Much Can You Contribute to Your 401(k), 403(b) or 457 Plan? |
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| Tax Year |
Maximum Salary
Deductions* |
If You're 50+, You Can
Contribute an Additional |
| 2001 |
$10,500 |
N/A |
| 2002 |
$11,000 |
$1,000 |
| 2003 |
$12,000 |
$2,000 |
| 2004 |
$13,000 |
$3,000 |
| 2005 |
$14,000 |
$4,000 |
| 2006 |
$15,000 |
$5,000 |
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| Starting in 2006, employees will be able, at their employers' discretion, to make non-deductible Roth IRA contributions to their 401(k) or 403(b) plans.
* Your limits may be lower depending on the results of discrimination testing of your employer's pension plan. Please contact your Benefits department for more information about your specific situation. |
- Starting in 2002, you (or grandparents or other relatives) can contribute a total of $2,000 each year for each child until age 18. That's four times the old contribution limit of $500!
- Contributions are not tax-deductible, but earnings accumulate on a tax-free basis.
- And you can withdraw money federal tax-free for elementary, secondary school and college expenses. You may have to pay state tax, but most states' income tax laws have already been changed to conform to the federal law. Check with your tax advisor to make sure.
- You'll have until April 15, 2003 to make your contributions for 2002.
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Penalty-free Withdrawals from IRA
You may be able to take money out of your IRA without paying any penalties. In fact, you can make penalty-free withdrawals-even if you're under age 59½-for several purposes.
Penalty-free Withdrawals for Home Purchase
The IRS will waive its usual 10% penalty for withdrawals before age 59½ if the money you take out is used to purchase a new home for yourself, your spouse, a parent, child, or grandchild. Specifically, you can withdraw up to $10,000 over your lifetime to buy one or more homes, as long as the house you buy is either a first home or is purchased at least two years after the sale of your previous home. Consult your tax advisor for more information.
Penalty-free Withdrawals on a Series of Payments
You can take money out of an IRA without penalties to use for any purpose as long as you take out a regular amount for 1) five years or 2) until you reach 59½, whichever is later. The IRS gives you a choice of three methods of calculating your monthly withdrawal amount. Talk with your tax adviser if you're considering this option.
Investment earnings (from a Roth IRA or Traditional IRA) and deductible contributions (from a Traditional IRA) will be taxed as ordinary income when they're withdrawn.
Penalty-free Withdrawals for Medical Expenses
If you have medical expenses that total over 7.5% of your adjusted gross income (AGI) in any given year, you can withdraw money penalty-free to pay for your expenses over the 7.5% level. If you should become disabled, you can withdraw whatever amount you wish without penalty. Consult your tax advisor for more information. |
Website created and maintained by SRJ Consulting.
Copyright © 2002 Shiv R. Jhawar, All Rights Reserved.
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