How Much Money Can I Put into My IRA or Employer-Sponsored Retirement Plan?

All types of IRAs and employer-sponsored retirement plans are subject to annual contribution limits set by the federal government. The limits are generally adjusted periodically to compensate for inflation and the increase in the cost of living.

IRAs

For the 2012 tax year, you can contribute up to $5,000 to all IRAs combined, the limit will be adjusted for inflation annually. For instance, if you have a traditional IRA as well as a Roth IRA, you can only contribute a total of the annual limit in one year, not the annual limit to each.

If you are age 50 or older, you can also make an annual $1,000 “catch-up” contribution.

Employer-Sponsored Retirement Plans

Employer-sponsored retirement plans, such as 401(k)s and 403(b)s, have a 2012 contribution limit of $17,000; individuals aged 50 and older can contribute an extra $5,500 as a catch-up contribution.

If you are currently contributing to an IRA or an employer-sponsored retirement plan, it may be wise to check the contribution limit each year in order to put aside as much as possible.

Distributions from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income and may be subject to an additional 10% federal income tax penalty if taken prior to reaching age 59½. If you participate in both a traditional IRA and an employer-sponsored plan, your IRA contributions may or may not be tax deductible, depending on your adjusted gross income.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

*An Index is a portfolio of specific securities. The performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance is not indicative of future results.

Investors should be aware of additional risks associated with international investing such as increased volatility, currency fluctuations and differences in auditing and financial standards.

Investors need to be aware that no investment plan/asset allocation can eliminate the risk of fluctuating prices and uncertain returns.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary; therefore, the information should be relied upon when coordinated with individual professional advice.

Robert S. Keidan is a Registered Representative of and offers securities products & services through Royal Alliance Associates, Inc. Member FINRA/SIPC, a registered broker-dealer. In this regard, this communication is strictly intended for individuals residing in the states of AL, AZ, CA, CO, CT, FL, GA, HI, IL, IN, KS, KY, LA, MD, MI, MO, NC, NY, OH, OR, PA, SC, VA, WA, and WV. No offers may be made or accepted from any resident outside the specific states referenced.

Robert S. Keidan is also separately registered as an investment advisor representative under Keidan Financial Consultants, LLC a Registered Investment Advisor. As such, advisory services are strictly intended for individuals residing in the states where we have notice filed: AZ, CA, CO, CT, FL, GA, HI, IN, LA, MI, NC, SC, VA, WA, and WV.

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