Roth IRA Limits for 2009

If you're wondering what the Roth IRA limits for 2009 and beyond are, you are not alone. And you've come to the right place to find out! These contribution limits are set by the government and are indexed for inflation each year. I will cover these limits later in this page, but first a little Roth IRA 101.

What is a Roth IRA? Established in 1997, this Individual Retirement Account (or Arrangement) is named after its chief sponsor, the late Senator William Roth of Delaware. This type of IRA differs in many ways from other IRAs.

Contributions made to a Roth IRA are made with after-tax dollars, or money that you've already paid taxes on. But, Roth IRAs grow tax free after that. This makes them very attractive to investors, especially if you have a lot of time before you plan to draw the money out.

Who is eligible for a Roth IRA?

Not everyone can contribute to a Roth. Roth IRA limits for contribution amounts are determined by your annual income. For single tax filers, if your Modified Adjusted Gross (MAGI) income is under $101,000, you qualify for a full contribution. If your MAGI is between $101k and $116k, you can make a partial contribution. If your income is over $116k, you cannot contribute to a Roth.

For joint tax filers, MAGI under $159k can make a full contribution. MAGI between $159k and $169k qualify for a partial contribution. And if your MAGI is over $169k, you cannot make a Roth IRA contribution for that year.

Roth IRA Advantages

1. Earnings grow tax-free until you withdraw them.
2. You can take out up to $10,000 in earnings to buy a principal residence if you have not owned a home in the last 2 years.
3. You can contribute even if you participate in a qualified retirement plan such as a 401K.4. The Roth does not require you to take money out of it, EVER. Traditional IRA's require that you start taking money out at age 70 1/2.
5. Actual contributions to a Roth can be withdrawn at any time with no tax penalty since you've already paid the taxes on them.

Disadvantages of a Roth

1. Contributions are made with after-tax dollars. You get no tax deduction for contributing money to a Roth.
2. You may end up paying higher taxes or being in a higher tax bracket because the money you put into the Roth was not deductible.
3. Congress may decide at some future point to change the rules that allow you to pull out your contributions at any time with no penalty.
4. Eligibility is based on income levels.

2009 Roth IRA Limits

For 2009, you can invest $5,000 in a Roth IRA if you are age 49 & below. If you turn age 50 or older in 2009, you can invest $6,000. In 2010 these numbers will be adjusted upward again for inflation, but the exact amount has not yet been released as of yet.

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