For 2021, the maximum IRA contribution limit is $6,000, or $7,000 if you’re aged 50 and older. Unfortunately, the maximum IRA contribution limit of $6,000 has stayed the same as the contribution limit for years.
The IRA and the 401(k), where the maximum contribution for employees increases to $19,500 for 2021, are the two main sources of pre-tax retirement accounts.
Unfortunately, not everybody gets to contribute to a traditional IRA because of income limits the government imposes. Having an income limit is a silly law because the American government should encourage ALL Americans to save more for retirement given the median retirement household savings is only around $5,000 – $10,000.
2021 IRA Income Eligibility Increase
In order to contribute the maximum IRA contribution limit, you must make no more than the following amounts by marital status.
- Single taxpayers covered by a workplace retirement plan: the phase-out range for contributing to a traditional IRA is $64,000 to $74,000, up from $63,000 to $73,000.
- Married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan> the phase-out range is $103,000 to $123,000, up from $101,000 to $121,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000, up from $189,000 and $199,000.
- Married individual filing a separate return who is covered by a workplace retirement plan: the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Roth IRA Income Limits For Contribution
The income phase-out range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500.
IRA Contribution Income Limits Need To Be Higher
It’s too bad the income limits where phase-outs begin are not higher for high cost of living areas. For example, here in San Francisco, the Department of Urban Development classify a household with one or two children with a $100,000 income or less as “low income.”
I recommend the income limits to be at least double the current limits to be inclusive of all Americans. Allowing Americans to save for their financial future is not only good policy, it also helps reduce future taxes as there will be less of a dependency by Americans for government assistance.
It truly requires about $300,000 a year in household income to live a middle class lifestyle in places like San Francisco, New York, Seattle, and other major metropolitan cities. What the government is saying is that despite the extraordinary high cost of living for millions of people, they aren’t allowed to contribute pre-tax money to an IRA.
If you are shut out from contributing to a IRA like I was after my first year of work in New York City, I highly recommend you contribute the maximum possible to a 401(k). Here is my 401(k) by age guide to help you keep on track.
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