IRA Roth Contribution Limits 2018: A Comprehensive Guide

Introduction

Individual Retirement Accounts (IRAs) are an important tool for saving for retirement. They offer tax advantages that can help your money grow faster than it would in a traditional savings account. There are two main types of IRAs: traditional IRAs and Roth IRAs. Traditional IRAs offer tax-deductible contributions, but withdrawals are taxed as income in retirement. Roth IRAs offer tax-free withdrawals in retirement, but contributions are not tax-deductible.

The contribution limits for IRAs are set by Congress each year. For 2018, the contribution limit for both traditional IRAs and Roth IRAs is $5,500.

Eligibility for IRA Contributions

To be eligible to contribute to an IRA, you must meet the following requirements:

• You must be under the age of 70½.
• You must have earned income.
• You cannot be covered by an employer-sponsored retirement plan, or your coverage must be limited.

Roth IRA Contribution Limits

The contribution limit for Roth IRAs is $5,500 for 2018. However, if you are age 50 or older, you can make a catch-up contribution of an additional $1,000, for a total contribution limit of $6,500.

Phase-Out Income Limits

The Roth IRA contribution limit is phased out for high earners. For 2018, the income limits are as follows:

Overcoming the Income Limits

If your income exceeds the Roth IRA contribution limits, there are a few ways to overcome the restrictions:

• Convert a traditional IRA to a Roth IRA. This is a taxable event, but it can be a good way to access tax-free withdrawals in retirement.
• Make a backdoor Roth IRA contribution. This involves contributing to a traditional IRA and then converting it to a Roth IRA. This is not a taxable event, but it may be subject to income limits.
• Contribute to a spousal Roth IRA. If your spouse meets the Roth IRA income requirements, they can contribute to a Roth IRA even if you exceed the income limits.

Benefits of Roth IRAs

Roth IRAs offer a number of benefits, including:

• Tax-free withdrawals in retirement. This is the biggest benefit of Roth IRAs. Unlike traditional IRAs, withdrawals from Roth IRAs are not taxed as income.
• Tax-free growth. The money in your Roth IRA grows tax-free. This means that you can accumulate more wealth over time than you could in a traditional IRA.
• No mandatory withdrawals. You are not required to take withdrawals from your Roth IRA until you reach age 70½. This gives you more flexibility in retirement.

Contribution Deadline

The deadline to contribute to an IRA for the 2018 tax year is April 15, 2019. You can make contributions for the 2018 tax year until the deadline, regardless of when you file your taxes.

Conclusion

Roth IRAs are a great way to save for retirement. They offer tax-free withdrawals in retirement, tax-free growth, and no mandatory withdrawals. If you are eligible to contribute to a Roth IRA, you should take advantage of this valuable retirement savings tool.

Frequently Asked Questions

1. What is the contribution limit for Roth IRAs in 2018? The contribution limit for Roth IRAs in 2018 is $5,500. Individuals who are age 50 or older can make a catch-up contribution of an additional $1,000, for a total contribution limit of $6,500.
2. Am I eligible to contribute to a Roth IRA? You are eligible to contribute to a Roth IRA if you meet the following requirements:
   • You are under the age of 70½.
   • You have earned income.
   • You cannot be covered by an employer-sponsored retirement plan, or your coverage must be limited.
3. What are the income limits for Roth IRA contributions? The Roth IRA contribution limit is phased out for high earners. For 2018, the income limits are as follows:
   • Single: $118,000 - $133,000
   • Married Filing Jointly: $189,000 - $199,000
   • Head of Household: $129,000 - $139,000
4. What are the benefits of Roth IRAs? Roth IRAs offer a number of benefits, including:
   • Tax-free withdrawals in retirement
   • Tax-free growth
   • No mandatory withdrawals
5. What is the deadline to contribute to a Roth IRA for the 2018 tax year? The deadline to contribute to a Roth IRA for the 2018 tax year is April 15, 2019.
6. Can I convert a traditional IRA to a Roth IRA? Yes, you can convert a traditional IRA to a Roth IRA. This is a taxable event, but it can be a good way to access tax-free withdrawals in retirement.
7. Can I make a backdoor Roth IRA contribution? Yes, you can make a backdoor Roth IRA contribution. This involves contributing to a traditional IRA and then converting it to a Roth IRA. This is not a taxable event, but it may be subject to income limits.
8. Can I contribute to a spousal Roth IRA? Yes, you can contribute to a spousal Roth IRA. If your spouse meets the Roth IRA income requirements, they can contribute to a Roth IRA even if you exceed the income limits.