Each spouse can make a contribution up to the current limit; however, the total of their combined contributions cannot exceed the taxable compensation reported on their joint return. People who juggle multiple IRAs or who set automated contributions that are too high could end up putting too much money into a roth IRA or a traditional IRA. And remember, the IRS also increases the contribution limit over time to keep up with inflation. If you (and your spouse, if married) are covered by an employer-sponsored retirement plan, then the traditional IRA tax deduction may be capped based on your modified adjusted gross income (MAGI), that is, your income, before subtracting the loan interest tax deduction students and other tax deductions.
If you have the money, it may make financial sense to make the full contribution at the beginning of the year. See Publication 590-A for certain conditions that may allow you to avoid including excessive tax withdrawals in your gross income. However, if you or your spouse (if you file taxes as married filing jointly) are covered by a retirement plan at work, your contributions may not be deductible, depending on your income. For IRA contributions, the Saver's Credit amount is 50%, 20%, or 10% of your contributions, depending on your adjusted gross income.
Contributing to an Individual Retirement Account (IRA) is a great way to increase your retirement savings and benefit from tax-protected investment growth. If neither spouse participated in a retirement plan at work, all their contributions will be deductible. Unlike contributions to a traditional IRA, which may be tax-deductible, a Roth IRA has no upfront tax exemptions. But it might make more sense to find an ideal number and then work backwards to figure out how much you should contribute to your accounts, calculating the average rates of return, the investment time frame, and your risk capacity, rather than simply blindly committing a certain sum to an IRA.
Like employer-sponsored 401 (k) s, traditional IRAs can dramatically reduce the amount of income you have to transfer to the federal government. If your income is above certain thresholds, you may not be eligible for a Roth IRA or your contributions may be limited. To get the most out of an IRA, whether traditional or Roth, you'll need to understand how these accounts work in general and their annual contribution limits in particular.