Roth IRA limits have changed in recent years and are expected to change much more in the near future. Under the current system Roth IRA limits are governed by rules established by the federal government and the IRS. Under these rules your IRA contribution limits will vary according to inflation going forward. Currently the way the Roth IRA limits are set up an individual who is eligible for a Roth IRA (by income requirement) can deposit up to $6,000 a year. Of course this is dependent upon your age in the year in which you make the contribution. And in future, the Roth IRA limits will be tied to inflation and will adjust by $500 increments depending upon inflation gauges. Now, that is if the present system of individual retirement accounts remains in tact. At the moment there are rumblings coming out of Washington that the IRA system may be abolished in the near future. You may be asking why this should be the case. Allow me to explain. Currently, using a Roth IRA, an individual is allowed to put away money to plan for their retirement. Assuming the individual reaches a the retirement age and begins to accept distributions (which are essentially withdrawals from an IRA) then they can access their money tax free. In other words the money that they withdraw they get to keep and they do not pay a percentage to the federal government. As we have elected new leadership, it is believed that the government will change this system negating the tax benefits of the Roth IRA. When this happens then the individuals who have been planning to access their money tax free will, quite simply, not be able to get at it without paying a tax to the government. The reason that the tax free status will be revoked is because the government wants to provide more services to citizens and needs the revenue stream. Regardless, at the moment the present laws still apply to Roth IRAs and Traditional IRAs so let’s return to our discussion of Roth IRA Limits.

When considering Roth IRA limits, please be aware that the limits imposed by the government are annual. These limits are currently set for 2009 as $5,000 for individuals under the age of 49 and for $6,000 for individuals over the age of 49. Therefore you may make deposits weekly, monthly, quarterly or by pay check and they will not be regulated. The Roth IRA limits only maintain that you do not exceed the annual amount, either $5,000 or $6,000 depending upon your age in the calendar year of 2009.

Many tax professionals recommend that you allocate the maximum amount allowable under the law for your Roth IRA. However, these tax advisors are aware of the fact that the days of the IRA system may be numbered. However, there is no disadvantage to funding your IRA at present. Do not allow the fact that the law might be changed to influence your thinking about the Roth IRA advantages. Also, I recommend strongly that you consult with a tax advisor before making any investment decisions regarding your retirement or investments. IRA Limits is only my personal blog for my ideas regarding the issues of IRAs and IRA Rules and regulations. I am not a professional tax advisor and I recommend that you consult with one before you make any decisions. That said, let’s return to our discussion of Roth IRA limits.

it is important that you factor age into the equation when deciding if you are going to fully fund your retirement account up to Roth IRA limits. Remember that the more time between you and your retirement age then the more your money will have the opportunity to grow. Also, as we have already stated, be aware that your ultimate Roth IRA contribution limit is determined by your age. For the year 2009, if you are over 49 you may contribute up to $6,000 to your IRA. If under 49 your Roth IRA contribution limit is $5,000. Now, it is likely that you will be able to fund your retirement account with more money depending upon your age because if you are closer to retirement age you will need to withdraw your money sooner meaning that it will have less time to accrue capital gains. Therefore the federal government sets your Roth IRA limit at a higher real dollar amount because you will need to be withdrawing the money sooner and therefore need to juice your account a bit.

Remember that rules are certain to change and that the present Roth IRA limits may be the governing limits in the future. You need to do due diligence when deciding how to allocate your retirement funds. Also, be aware of the movement to abolish the IRA and make that money taxable to the government. I believe that that will have disastrous effects for the economy however some believe that it is necessary to offer more government services to the citizens of this country. As to how the rules will be written I do not know, and can only speculate however at this point I believe it is wise to heed the current Roth IRA limits when planning for your retirement.