30 Mar 2021 Roth IRA Contribution Limits
It’s tax time, which means it is time to review some of your accounts. For many, this includes their 2021 Roth IRA. Remember, you can make 2020 contributions until April 15th, 2021. You were eligible to start making 2021 contributions on January 1st, 2021. The contribution limit for Roth IRAs and traditional IRAs is $6,000 for anyone under 50 years old. Individuals who are 50 and older can contribute up to $7,000 per year instead.
Roth contribution eligibility amounts have also changed for 2021.
Your Roth IRA contribution eligibility is based on your modified adjusted gross income, or MAGI. Traditional IRA contributions, on the other hand, are not limited by annual income.
If you are a single individual, here’s how your contribution limits break down.
Single Individuals And Roth IRA
In 2020, if you made less than $124,000, your contribution limit is $6,000. If you made more than $124,000 but less than $139,000, you are eligible for partial contribution. You can calculate that amount here. If you made over $139,000 you were not eligible for ROTH IRA contribution.
However, in 2021, this number changed. If you make less than $125,000 you have a $6,000 contribution limit. If you make between $125,000 and $140,000, you are eligible for partial contribution. However, if you make more than $140,00 you are not eligible for Roth IRA contributions.
Married Couples And Roth IRA
In 2020, married couples who were filing joint returns had to make less than $196,000 in order to qualify for their full ROTH IRA contribution. Married couples who had a MAGI of less than $196,000 could contribute up to $6,000 (or $7,000 if you are over 50). Couples who made more than $196,000 but less than $206,000 are eligible for partial contribution. In 2020, married couples who made more than $206,000 were not eligible for ROTH IRA contributions at all.
In 2021, these numbers have changed slightly. Now, if you as a married couple make less than $198,000 you are eligible for the full $6,000 (or $7,000) maximum for your Roth IRA contributions. If you and your spouse make more than $198,000 but less than $208,000 you are eligible for partial contribution. If you make more than $208,000 you will not be eligible for any Roth IRA contributions.
There are, of course, different annual limits for SIMPLE IRAS, SEP IRAs, 401(k)s or investment plans. This is something you can discuss further with your financial planner.
Remember, Roth contributions, including conversions typically have important tax implications, so it is important to pay close attention to these strategies when you discuss your finances. If you have more questions about what these changes mean for you, or what you can expect with your Roth IRA moving forward, contact the experts here at Faithful Finance today. We are here to guide you through this process so you can continue to make smart financial decisions for you and your family.