Why Do the Roth IRA Contribution Limits Keep Changing?


Quick Answer

The Internal Revenue Service changes Roth Individual Retirement Account contribution limits, which are in $500 increments, based on the rate of inflation, states The Motley Fool. The IRS authorizes increases to contribution limits when inflation makes the cost of goods and services approximately 9 percent higher than they were at the time of the last increase. Tax year 2013 was the last year that IRA contribution limits were increased.

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Full Answer

In 2015, the maximum annual contribution limit to a Roth IRA is $5,500 for people under 50 years old. However, individuals 50 years or older may contribute an additional $1,000, known as a catch-up contribution, according to the IRS. This $1,000 additional contribution does not adjust for inflation, notes The Motley Fool.

To be eligible to contribute to a Roth IRA, an individual must not exceed certain earned income limits, which also adjust according to the inflation index, explains The Motley Fool. For the 2015 tax year, contributions are potentially phased out, beginning at $116,000 for single filers with a maximum income of $131,000, according to U.S. News & World Report. The maximum income range for married tax filers filing a joint return is between $183,000 and $193,000.

A new type of Roth IRA, called myRA, is available for low- to middle-income wage earners, as of the 2015 tax year, reports U.S. News & World Report. The income limit is a maximum of $129,000 for single individuals and $191,000 for married couples.

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