I will add the 2011 numbers as I get them. Also note that in 2010 the income limits to contribute to a ROTH IRA are removed when doing a conversion to a ROTH IRA.

It is obvious that the government hasn’t done much to increase those limits. I am still hearing rumors that they are wanting to get rid of the ROTH IRA loophole, so my advice to you is to max that out if possible, since it is a great tax savings vehicle. Don’t forget that you can contribute to a 2010 ROTH IRA in 2011 prior to April 15th. So even if you haven’t started setting aside your 2010 contributions, you still have about 6 months to get that $5000 in there.

For those of you new to planning for retirement, here is what I recommend:

• Pay into your 401k the required amount to receive your full company match (if your company doesn’t have a 401k match, skip this)
• If you have credit card debt, pay it off!!! (if no credit card debt, skip this)
• Max out a ROTH IRA. Put $5000 after tax dollars into a 2010 ROTH IRA
• Max out your 401k. The current max is $16,500 for 2010
• Save Save Save – Start saving the rest of your extra cash. It is always recommended to have a buffer of 4-6 months of your living expenses saved up in case of unforeseen circumstances, such as job loss, illness, etc.

If you follow those simple steps, you should be on your way to a healthy retirement. Now only if we could get the market and economy to cooperate!!

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Note that in 2010 the income limits to contribute to a ROTH IRA are removed when doing a conversion to a ROTH IRA.

Make sure you use the rest of 2008 to max out a ROTH and 401k or 403b if possible. Remeber that investing sooner than later will allow your retirement to grow in the long term. Also consider the fact that since the market is currently down, what better time to buy low and watch it rise!

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Here are the contribution limits for 2008 for each retirement plan (401k, ROTH, 403b, and Simple IRA). I also included the 2007 limits as a comparison:

Note that for a ROTH IRA there are certain income limits that start to phase out how much you can contribute. If you are within the phase out range you can only make a partial contribution. If you are above that range then you are not eligible to make a contribution to a ROTH for that year. When you file your taxes it will tell you how much you can contribute based on your adjusted gross income (AGI). Personally, I usually wait to contribute to my ROTH the day before I file my taxes to make sure I haven’t over contributed based on my AGI.

Also don’t forget that you can still contribute to your ROTH IRA for 2007. Just make sure you do so prior to filing your 2007 taxes.

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Here are the contribution limits for 2008 for each retirement plan (401k, ROTH, 403b, and Simple IRA). I also included the 2007 limits as a comparison:

Note that for a ROTH IRA there are certain income limits that start to phase out how much you can contribute. If you are within the phase out range you can only make a partial contribution. If you are above that range then you are not eligible to make a contribution to a ROTH for that year. When you file your taxes it will tell you how much you can contribute based on your adjusted gross income (AGI). Personally, I usually wait to contribute to my ROTH the day before I file my taxes to make sure I haven’t over contributed based on my AGI.

Also don’t forget that you can still contribute to your ROTH IRA for 2007. Just make sure you do so prior to filing your 2007 taxes.

No related posts.