If you have a Roth IRA, or if you're preparing to open one, it's important to review Roth IRA income limits. Federal law prohibits individuals who make more than the income limit from contributing fully to a Roth IRA. Knowing the current Roth IRA income limits can help you decide if a Roth IRA is right for you, or if you may need to explore other retirement savings options. One important note, however: It's important to check with your tax consultant before making a move to ensure that your particular situation makes a good fit.
What are the Limits?
The IRS determines Roth IRA income limits. Income limits are based only on an individual's compensation income: wages, salaries, tips, bonuses and self-employment income.
For tax year 2012:
- Single filers with average gross income below $110,000 can contribute the maximum amount. Filers with income between $110,001 and $125,000 are eligible to contribute a prorated amount. Filers with income above $125,000 are considered above the Roth IRA income limits.
- Joint filers with average gross income below $173,000 can contribute the maximum amount. Filers with income between $173,001 and $183,000 are eligible to contribute a prorated amount. Joint filers with income above $183,000 have exceeded the Roth IRA income limits.
If your income exceeds the Roth IRA income limits, there are other retirement savings options you may want to consider.
Traditional IRAs do not have income limits, so you can contribute to the account regardless of your income. However, there are maximum contribution limits for traditional IRAs. For 2012, the limit is $5,000 for people under age 50, and $6,000 for those ages 50 or older.
Ally Bank offers retirement products for both Roth and traditional IRAs that can help you safeguard your retirement savings. You can learn more about our products, including our IRA High Yield CD and IRA Online Savings Account by visiting AllyBank.com.
Longer-term Certificates of Deposit (CDs) might be another option worth considering. Generally considered low-risk accounts, CDs pay interest on your deposit and can help you grow money for retirement. Typically, the longer the CD's term, the higher its interest rate. If you know that you may not need access to your money for a few years, a 3-year or 5-year CD could be a good way to get a great rate and boost your savings.
At Ally Bank, our CDs have rates that are consistently among the most competitive nationwide according to rates published by Bankrate. In fact, Ally Bank offers the same great rate to everyone, and it's not uncommon to find that our APYs beat some other banks' jumbo CD APYs according to MyBankTracker.
And of course, as with our IRA products, your funds in Ally Bank CDs are FDIC-insured up to the maximum amount allowed by law.
If you have more questions about Roth IRA income limits, or which IRA product might be right for you, you can contact a live Ally Bank customer care representative anytime, 24/7 at 877-247-ALLY (2559).