When it comes to investing, there are many different rules and guidelines that you have to learn, understand, and follow. One of these guidelines comes in the form of IRA contribution limits. If you have an individual retirement account, you are limited to how much money you can put into it every single year. Therefore, if you want to invest a lot, you will need to have multiple investment accounts or choose different types of investments to make.
IRA contribution limits are currently adjusted in increments of $500 depending on the rate of inflation. The limits for 2009 were $5,000 for those ages 49 or younger and $6,000 for those over the age of 49, and that amount will rise for the 2010 limits depending upon how much inflation increases. There are some important things to know about your contributions, including the most important fact that they operate on a ‘use it or lose it’ basis. That means that if you don’t invest the full amount one year, you can’t invest more the next year because you had leftovers. In the world of IRA contributions, leftovers don’t exist.
The traditional and Roth IRA both have the same IRA contribution limits, so you don’t need to worry about which type of account you have. Keep in mind that there are also limits on the amount of income that you have. This will influence whether or not you can invest at all, depending on your marital status and total income for the year. Talk to your financial advisor to find out the guidelines for the current year. If you make too much, you will be limited to investing only a certain amount much lower than the standard limit, or you might not be able to invest at all.
Of course, as with all things in life and especially investments, there are exceptions to every rule. You need to make sure that you take the time to talk to your financial advisor about your specific situation regarding IRA contribution limits so that you are properly prepared for your investments. Make sure that you discuss the details that are applicable to you, because they will not be applicable to everyone. No one likes to deal with the ‘hassle’ of investments or trying to figure out exactly what each one has to offer them, but as long as you take the time to discuss your situation and options with a professional, you will have an easier time determining which rules and regulations apply to your IRA accounts and contributions.