Roth IRAs are funded with after-tax dollars; the contributions are not tax-deductible. The standard Roth IRA contribution limit is $5,500 in 2014 and $6,500 in 2015; however, you can contribute up to $5,500 if your modified adjusted gross income is $121,000 or less in 2014 and $6,500 if your modified adjusted gross income is $130,000 or less, if you are ready to get started, you can begin the process by using a roth IRA calculator to determine how much your Roth IRA contributions could be worth at retirement . You cannot contribute more than the latter limit to a Roth IRA. Additional IRS conditions, and when the distributions are taxable, can apply. If you are contributing to a Roth IRA through a tax-favored retirement account, you are also subject to the 6% early withdrawal penalty, along with a 10% early withdrawal penalty if you are 60 days or older, do not participate in a qualified employer plan, and are not currently covered by a retirement plan offered by an employer that has offered you a matching contribution on the plan. You also may be subject to the 10% early withdrawal penalty if you are contributing to a Roth IRA through an employer that offers you no matching contribution, unless you or your spouse have a tax-deferred annuity account. For a list of these federal rules, visit www.irs.gov/RothContributions.
Other retirement plans
You can contribute to your IRA through a variety of other types of retirement plans. Some retirement plans allow you to make partial contributions, or provide you with additional features that you cannot get from a Roth IRA. You should consult your retirement plan provider to learn more.
The Contribution Limit for 401(k)
Employers have the flexibility to increase the contribution limit for employees to 401(k) plans. However, it is important to make sure you are making the correct contribution, if you are taking distributions from your 401(k). This will help ensure you avoid penalties and other restrictions.
For IRS information about the IRS 401(k) contribution limit, see 401(k) Eligibility and Contribution Limits.
Special rules regarding Roth IRAs
For more information on Roth IRAs, see Roth IRAs in Retirement Planning.
Additional tax provisions for 401(k) plans
You may have a separate retirement account for 401(k) contributions under the rules of your plan. These retirement accounts may be a Roth IRA, a traditional IRA, or another type of retirement account that you contribute to as part of your 401(k) plan. The retirement account may also allow you to take partial contributions.
If you contribute a total of more than the annual limit to your 401(k) plan, you can elect to defer contributions for up to five years. This deferral period ends each year when you reach your annual limit. However, you must give notice to your employer before the fifth year. Your employer may elect to reimburse you for the portion of your 401(k) plan contributions that you did not contribute.
Roth IRAs are funded with after-tax dollars; the contributions are not tax-deductible. The standard Roth IRA contribution limit is $5,500 in 2014 and $6,500 in 2015; however, you can contribute up to $5,500 if your modified adjusted gross income is $121,000 or less in 2014 and $6,500 if your modified adjusted gross income is $130,000 or less. You cannot contribute more than the latter limit to a Roth IRA. Additional IRS conditions, and when the distributions are taxable, can apply. If you are contributing to a Roth IRA through a tax-favored retirement account, you are also subject to the 6% early withdrawal penalty, along with a 10% early withdrawal penalty if you are 60 days or older, do not participate in a qualified employer plan, and are not currently covered by a retirement plan offered by an employer that has offered you a matching contribution on the plan. You also may be subject to the 10% early withdrawal penalty if you are contributing to a Roth IRA through an employer that offers you no matching contribution, unless you or your spouse have a tax-deferred annuity account. For a list of these federal rules, visit www.irs.gov/RothContributions.