If you’re planning out the rest of this year’s finances, chances are you’re paying attention to the IRA contribution limits for 2017. As a reminder, the limits shown for 2017 are NOT the numbers you will use to file your 2016 taxes in the next couple of months (you’ll want the 2016 numbers for that). These, however, are the numbers you will want to reference when planning your contributions for the rest of this year.
Take full advantage of the account(s)
The easiest way I’ve found to ensure that you max out your IRA (gotta take every advantage the government will give you!) is to simply spread out even contributions throughout the year. So, with this year’s IRA limit being $5, 500, you’ll want to contribute just over $458 a month, from January through December.
What if you receive an unexpected windfall this year or get a raise? Do yourself a favor and put some of that toward your retirement accounts first. Then, come the end of the year, you won’t be stressing about whether or not you’ve hit your mark. (Your deadline actually isn’t December 31st, but more on that below). You might even be able to max out the account earlier in the year. Then, you’ll have wiggle room in your budget for the holidays or to put extra toward savings.
How much can you contribute?
As you can see from the table below, nothing has changed yet again this year as far as IRA limits go.
|Year||Under Age 50||Age 50+|
|2002-2004||$3, 000/year||$3, 500/year|
|2005||$4, 000/year||$4, 500/year|
|2006||$4, 000/year||$5, 000/year|
|2007||$4, 000/year||$5, 000/year|
|2008||$5, 000/year||$6, 000/year|
|2009||$5, 000/year||$6, 000/year|
|2010||$5, 000/year||$6, 000/year|
|2011||$5, 000/year||$6, 000/year|
|2012||$5, 000/year||$6, 000/year|
|2013||$5, 500/year||$6, 500/year|
|2014||$5, 500/year||$6, 500/year|
|2015||$5, 500/year||$6, 500/year|
|2016||$5, 500/year||$6, 500/year|
|2017||$5, 500/year||$6, 500/year|
A few notes…
Traditional and Roth IRA contributions are added together
First, note that this limit is a combined limit for traditional and Roth contributions. While you can contribute to both accounts in the same year, the total contribution cannot exceed the $5, 500 (or $6, 500) limit.
Contributions may or may not affect your tax bill
Second, your traditional IRA contributions may be tax deductible. This depends on whether or not you’re covered by a retirement plan at work, and how much money you make. Details can be found here.
You might make too much for a Roth IRA
Third, you will need to ensure that your MAGI (modified adjusted gross income) does not exceed the eligibility cap for contributing to a Roth IRA. For 2017, this cap has increased and begins at $118, 000 for single filers and $186, 000 for married filers. At that point, an eligibility phase-out begins; once you reach the maximum threshold ($133, 000/single and $196, 000/married), you are no longer eligible to contribute without utilizing a backdoor Roth (a topic for another day).
||Can Contribute to Roth IRA?|
|Single Filers||$0 – $117, 999||Yes, up to $5, 500 (or $6, 500)|
|$118, 000 – $132, 999||Limited contributions allowed|
|Married Filers (combined income)
||$0 – $185, 999||Yes, up to $5, 500 (or $6, 500)|
|$186, 000 – $195, 999||Limited contributions allowed|
December 31 is NOT your deadline
Finally, remember that you can make contributions for 2017 all the way up to April 15th, 2018. Thus, if you still haven’t gotten around to it making your 2017 contributions by the end of the year, you still have a little bit of time. However, I would still recommend front-loading your tax-advantaged accounts as much as possible, so you can end the year without worrying about maxing out contributions.