With less than a month remaining until we have to file federal taxes, we're also a month away from the deadline for 2013 IRA contributions. IRAs, or individual retirement accounts, are an absolute must when it comes to saving for retirement, but to make proper use of them, you need to know the contribution limits that apply to these tax-favored accounts.

The two basic types of IRAs
Traditional IRAs allow your investments to grow tax-free until you begin taking withdrawals. Contributions to traditional IRAs can be tax-deductible depending on whether you have a retirement plan through work and on your income level, and withdrawals are taxed as regular income. These two complications, which are frequently overlooked, are some of the main reasons the traditional IRA is proposed to be scrapped in the Tax Reform Act of 2015 and replaced with Roth IRAs for everyone. You can read more here about the end of the traditional IRA as you know it.

Roth IRAs also allow your investments to grow tax-free; however, contributions are never tax-deductible. The benefit of Roth IRAs is that withdrawals are tax-free as long as you meet certain requirements.

IRA contribution limits
If you can save enough to do so, it's well worth it to contribute to an IRA up to the maximum allowed. However, you should contribute only if you don't foresee yourself needing the money until you retire. You pay a penalty on traditional IRA withdrawals before age 59 1/2, except under limited circumstances. Roths are somewhat freer about allowing withdrawals of your original contributions under certain circumstances, but it's still smarter to keep money within your IRAs until retirement. Retirement is, after all, what they're designed for.

You can contribute to traditional IRAs only until you are 70 1/2, while there's no age limit on Roth IRA contributions, as long as you have earned income.

The IRA contribution limit is whichever is less between an individual's total earned income or the amount shown in the following table.


Under Age 50

Age 50 or Older







Source: IRS.

Roth IRA limitations
If you earn more than a certain amount -- as determined by your filing status and adjusted gross income, or AGI -- you may not be allowed to contribute to a Roth IRA at all, or may only be allowed to contribute a reduced amount.

Roth IRA contribution limits for 2013


Source: IRS.

Note the middle categories ranging from $178,000 to $188,000 of AGI for joint filers and from $112,000 to $127,000 for single filers. You can find details of the calculation of reduced contribution limits for 2013 Roth IRAs at the IRS website.

Roth IRA contribution limits for 2014


Source: IRS.

The middle categories for 2014 have been adjusted upward for inflation. More details, again, are available from the IRS.

More questions?
If you have more questions on IRAs, check out The Motley Fool's IRA Center.

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Dan Dzombak didn't make his IRA contribution yet this year. You can find him on Twitter, @DanDzombak, or on his Facebook page, DanDzombak.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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