Every year or two, the maximum amount you can put into an individual retirement account, or contribution limit, increases with inflation. You can find past contribution limits here:
2014 IRA Contribution Limits / In 2014, the maximum contributions limit is $5,500. If you are age 50 1/2 or older you can add another $1,000 for a maximum contribution of $6,500 in 2014. That is, if your employer offers a catch-up contribution to encourage participants older than age 50 to save more in their pre-retirement years.
2014 Deductible IRA Contribution Limits
One of the benefits of contributing to an IRA is the potential to decrease your taxable income. For some individuals, IRA contributions are fully or partially income tax deductible. Typically, those who qualify do not have a 401(k) or retirement savings plan through work. You must also meet certain income limitations. In 2014, your deduction amount phases out if your income is between $59,000 and $69,000. If you are married and file jointly, you could likely take a deduction if your income is less than $95,000, and you will be ineligible if your income exceeds $115,000. If your spouse is covered at work but you are not, the phase out income amounts range from $178,000 and $188,000.
Note: You can make contributions to an IRA for a given tax year up until the time you file your income taxes for that year. That means you can make a 2014 contribution up until April 15, 2015. This makes the IRA a great tax planning tool.
2014 Contribution Limits for Other Types of IRAs
Roth IRA contribution limits are the same as traditional IRA limits: $5,500 or $6,500 if you are age 50 1/2 or older. Bear in mind, although the contribution limits are the same, Roth IRAs work differently. The money you put into a Roth is not tax deductible, Roths get after-tax dollars. But once in a Roth, the money is generally not taxed again when you withdraw the money at retirement. You can even take contributions out without penalty before retirement, although there are some restrictions on that too. If you are not getting a tax deduction on your IRA contributions, a Roth IRA could be a better idea for the long term. They are particularly attractive if you tax rate is currently low and you expect it to rise significantly by retirement age. That's the jackpot you are hoping for with a Roth IRA: you pay today's low taxes on tomorrow's potential millions.
2014 Self-Employed IRA Contribution Limits
Individuals who own their own business or work as a contractor have their own IRA choices: SIMPLE IRAs have risen to $12,000 in 2014, with catch-up contributions of $2,500.
Contribution limits for SEP IRAs work differently. You can contribute up to 25% of gross income up to $260,000, for a maximum contribution of $52,000 in 2014.
If you have a Individual 401(k) or Solo 401(k), your limits are the same as those for a regular 401(k): $17,500 in 2014, with an additional $5,500 catch-up contribution. That's a total maximum of $23,000.
Whatever type of IRA you have, your goal should be to contribute either up to the limit, or to get as close as you can. With a limit of $5,500, this should be a fairly easy goal. Can you do it in 2014?
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