Tuesday, November 27, 2012

2013 Roth IRA Contribution Limit Increased

The contribution limit for IRA's in 2013 increased from $5,000 to $5,500 if you're under the age of 50 and from $6,000 to $6,500 if you're over the age of 50.  Of course as usual there are income limits imposed in order to make a Roth IRA contribution.  For Married Filing Jointly, the phase-out starts at a modified adjusted gross income of $178,001 and goes to $188,000.  For a MAGI that is less than the $178,001 you can contribute the full $5,500 and for MAGI's over $188,000 you can't contribute anything.  If your MAGI falls in the range, your maximum allowable contribution is decreased on a linear basis over the full range.  So if your MAGI is $183,000 then you can only contribute half of the max at $2,750.  For Single and Head of Household, the MAGI limits are $112,000 and $127,000.

I really like the Roth IRA option since it allows you to invest after-tax money and all gains and dividends are never taxed again.  I'm currently utilizing the Roth IRA to build up some tax-sheltered savings and will continue to do so in the future.  After your Roth IRA has been open for 5 years you can begin to withdraw the cash that you invested tax and penalty free even if you aren't yet 59.5 years old.  Only the gains will be subject to an early withdrawal penalty should you need to withdraw them before age 59.5.  My plan is to continue contributing the max to the Roth IRA for myself and my wife unless we hit the income limits which is going to be close next year but I think we'll still come in under the phase out MAGI.  If the plan works out then once I reach early FI I'll just let the Roth IRA's grow until I reach 59.5 or continue to leave them be if I don't need to access that money.  The Roth IRA is a very valuable tool for retirement savings.


  1. Actually, contributions can be withdrawn at any time tax and penalty free. The five year rule is for pulling out gains penalty and tax free. And the penalty and tax free pull out of gains after 5 years is only for certain reasons.

    1. Ah...poor wording on my part. Either way the plan is to not have to touch the Roth IRA and be able to leave that for my future children to keep it invested and start them off on the path to early FI.

  2. Nice post, very helpful for us.I will come back here again & again...:)
    Also, to know more about...

    1. I'm glad it was helpful. I really like that it's been increased again because it lets me sock away that much more into my Roth IRA and not be taxed again.

      Thanks for stopping by!