A Roth IRA provides potentially tax-free savings and distributions. Unlike a traditional IRA, you don’t get a deduction for your contributions. The savings grow inside of the IRA without needing to pay any taxes on the earnings and growth. Distributions from a Roth IRA are completely tax-free, as long as you meet certain conditions. You can contribute to a Roth IRA even if you are covered by a retirement plan at work. But, Roth IRAs do have income limitations.

IRA Contribution Limits

The total amount that can be contributed to a traditional IRA or a Roth IRA (or any combination of the two) is limited.

• For 2014, the maximum IRA contribution is $5,500.
• For 2013, the maximum IRA contribution is $5,500.
• For the years 2008, 2009, 2010, 2011 and 2012, the maximum IRA contribution was $5,000.
• If you are age 50 or older, you can contribute up an additional $1,000, which is called a catch-up contribution.

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The contribution limit applies across traditional, nondeductible, and Roth IRA types. So if you wanted to fund both a traditional IRA and a Roth IRA, you could contribute any combination of funds to each IRA type, so long as the total does not exceed the annual limit. For example, a person could put $2,500 into a traditional IRA and another $2,500 into a Roth IRA.

IRA contributions are also limited by your qualifying income. For IRA purposes only, qualifying income means wages, self-employment income, alimony, and nontaxable combat pay. For example, let’s say you have wages of $3,500 and no other income. You can contribute up to $3,500 in any combination of traditional, nondeductible, or Roth IRA for the year.