Individual Retirement Accounts are powerful tools that help people save for retirement while simultaneously enjoying tax benefits. There are two primary types of IRAs: Traditional IRAs and Roth IRAs. Both accounts allow you to contribute a set amount each year, but the contribution limits and deadlines slightly differ between the two. Understanding these limits and deadlines will help to ensure that you maximize your retirement savings. This article breaks down the contribution limits for the year and provide a clear explanation of the deadlines you need to be aware of.

IRA Contribution Limits for Current Years

For both Traditional and Roth IRAs, the contribution limits for the year 2024 & 2025 are as follows:

• $7,000 if you are under the age of 50.
• $8,000 if you are age 50 or older, due to the catch-up contribution allowance.

This contribution limit applies to the total amount you can contribute to your IRA(s), whether it’s a Traditional IRA, Roth IRA, or a combination of both. However, you cannot exceed the individual limit of $7,000 or $8,000 (based on your age).

Key Differences: Traditional vs. Roth

Traditional IRA

Contributions to a Traditional IRA are tax-deductible in the year they are made. This means that you can lower your taxable income for the year which you contribute. For example, if you contribute $7,000 to a Traditional IRA, your taxable income for that year is reduced by $7,000, lowering your tax bill. The account will grow tax-deferred, meaning you don’t pay taxes on investment returns until you begin withdrawing funds, usually after age 59½.

Roth IRA

A Roth IRA, on the other hand, does not provide an immediate tax deduction. Instead, contributions are made with post-tax dollars, meaning you pay taxes on your income before contributing. The key advantage of a Roth IRA is that qualified withdrawals are tax-free. Roth IRAs also do not have Required Minimum Distributions (RMDs), which is a significant benefit for those who want their money to grow throughout retirement.

2025 Income Limits

Traditional IRA

When it comes to a traditional account, these restrictions do not come into play unless you want to deduct contributions. If you are contributing to an IRA covered by a workplace plan your eligibility limit to deduct is as followed.

• Single filers & Head of Household: The income phase-out range is $79,000-$89,000, which is a $2,000 increase.
• Married filing joint: The income phase-out range is $126-000-$146,000 which is a $3,000 increase.

Roth IRA

• Single filers & Head of Household: Phase-out range is $150,000-&165,000 which is a $4000 increase.
• Married filing joint: Phase-out range is $236,000-$246,000 which is a $6,000 increase.

If your income is above these limits, you cannot contribute directly to a Roth IRA, but you may still be able to make contributions through a backdoor Roth IRA, which involves making non-deductible contributions to a Traditional IRA and then converting it to a Roth IRA.

IRA Contribution Deadlines

You are able to make an IRA contribution for any given year during the time frame of January 1^st and the filing deadline of the following year, usually April 15^th.

For example:

• If you are making a 2024 contribution to your IRA, you can do so anytime in 2024 up until April 15, 2025.
• If you want to claim a contribution for 2024 on your tax return, you must have made it by April 15, 2025.

It’s important to note that contributions made after the deadline will count toward the next tax year even if you file for an extension. If you are aiming to maximize your contributions for a particular year, be sure to plan and contribute before the deadline.