Roth IRA Catch-up Rules

By Kent Ninomiya

  • Overview

    Roth IRA catch-up rules allow older investors to contribute more to their Roth IRAs. The Internal Revenue Service does this so that people approaching retirement age can save more in the limited time they have left. Roth IRA catch up rules are a recent development.; they did not exist until 2002.
  • History

    The Economic Growth and Tax Relief Reconciliation Act of 2001 allowed for future increases of contribution limits to Roth IRAs and created catch-up contributions for older investors. Starting in 2002, investors 50 years old and older were allowed to make "catch up" contributions to their Roth IRAs that were higher than the contribution limits placed on investors younger than 50 years old. The amount of the Roth IRA catch-up contributions changes from year to year.
  • Roth IRA Eligibility

    Roth IRA catch-up contributions are only allowed to be made by investors who make less than the IRS income limits. As of 2008, single people with adjusted gross incomes higher than $116,000 or married people with AGIs higher than $169,000 cannot make any contributions to a Roth IRA. Single people with AGIs between $101,000 and $116,000 as well as a married people with AGIs between $159,000 and $169,000 are allowed to make partial contributions. Those with lower AGIs can make maximum Roth IRA contributions. If they are 50 years or older, they can make catch-up contributions.

  • Catch-up Limits

    Prior to 2002, there were no catch-up contributions. Older investors were limited to Roth IRA contributions of $2,000 per year like everyone else. In 2002, the IRS established catch-up contributions for Roth IRAs at $3,500, compared with $3,000 for regular contributions. The IRS set catch-up contributions to $4,500 in 2005 then $5,000 in 2006 while regular contributions were $4,000. The IRS raised regular Roth IRA contributions to $5,000 in 2008 and simultaneously raised catch-up contributions to $6,000.
  • Catch-up Changes

    The Economic Growth and Tax Relief Reconciliation Act of 2001 allowed for increases in Roth IRA catch-up contributions from year to year based on inflation. They will always be higher than ordinary Roth IRA contribution limits. The Internal Revenue Service is expected to continue raising Roth IRA catch-up contribution limits in the future. Check with the IRS for the most current maximum IRA contributions for older investors.
  • Age Limit Benefit

    One of the benefits of Roth IRA catch-up rules is that there is no upper age limit to catch-up contributions. The IRA forbids investors from making any more contributions to traditional IRAs once they reach the age of 70 and one-half years. They are also forced to start taking distributions the next year. However, there are no age limits for contributions with Roth IRAs and no forced distributions.
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