The first thing you need to know about your 2011 IRA is that the final contribution deadline doesn’t happen until 2012. The IRS allows you to contribute to the previous year up until the normal federal tax deadline. Typically, this falls on April 15th, but because that falls on a Sunday this tax season, the federal government has extended the deadline two extra days to April 17th for most IRA accounts. See the information below for each account type.

This means that for your 2011 IRA contributions, you may contribute at anytime during 2011, and up until April 17th, 2012. If you make your contribution after January 1st but before the April 17th deadline, you need to designate the contribution year that you intend to target. For most tax filers, this can be calculated using the worksheets in either IRS Form 1040 or Form 1040a. For 2012 contributions, the federal deadline is set at April 15, 2013. The same rules and guidelines apply to this tax year as well.

Deadline for Establishing an IRA

If you didn’t establish an IRA in 2011, it’s not too late. The federal government allows you to establish an IRA in 2012 for the previous tax year. The establishment deadline is the same as the tax deadline, April 17th 2012 (and April 15th in 2013 for the previous year.) The establishment deadline works just like your taxes. Your IRA application must be postmarked by midnight of the deadline to be valid. This applies to both Traditional IRA and Roth accounts.

For SEP IRAs, the contribution deadline is the same, but the establishment for creating a SEP IRA is the date that the employers tax filing date is due. Typically this is mid April, but it can vary.

Simple IRA rules dictate that this type of individual retirement account must be established by October 1st. And finally, 401k plans also abide by the same contribution deadlines, but both Roth and Individual 401k plans must be established by December 31st.

Notes about extensions. In general, Roth and Traditional IRAs are not subject to extensions, except under certain circumstances. Other plans my be eligible for extension based on your or your employers tax filing deadline. Use the charts below to determine your contribution deadlines.

1. Traditional IRA Contribution Deadlines and Limits

2. Roth IRA Contribution Deadlines and Limits

3. SEP IRA Contribution Deadlines and Limits

4. SIMPLE IRA Contribution Deadlines and Limits

5. 401K Contribution Deadlines and Limits

What’s new with Roth IRA rules in 2012? Be sure to bookmark this page for reference. First, let’s recap the Roth IRA maximum contribution limits. These vary depending on your age, and the 2012 rules haven’t changed significantly since the 2011 Roth Income Limits.

Basically, if you are under fifty in 2012, the most the IRS rules allows you to contribute to your Roth IRA is five thousand dollars. If you are over fifty, they are a bit more generous and allow you to contribute up to six thousand dollars. This is known as the catch-up provision and applies to most, but not all, types of retirement accounts.

Keep in mind that these contribution limits apply to the combined contribution to both your Roth and traditional IRA, if you have both types of accounts. So your combined contribution to both of these funds cannot exceed these limits based on your age.

The tricky part is the income limits. Unlike traditional IRA limits, which restrict the amount of your contribution from your taxable income, the Roth IRA rules work in reverse. This means that your income determines how much you can contribute to your Roth. These income limits are based on your modified Adjusted Gross Income (AGI) and  your tax filing status. The higher your AGI, the less you can contribute.

Roth IRA income limits for 2012

If you file your taxes as a single filer, head of household or married filing separately (where you and your spouse did not live together), then you can make a full contribution to your Roth IRA up to one hundred and ten thousand dollars. Up to this amount you face no restrictions, but once your income increases above this point, the IRS begins to “phase out” the amount you can contribute. Finally, once your income reaches above one hundred and twenty-five thousand dollars, no contribution is allowed. This 2012 limits is up from 2011.

If your tax status is married filing jointly, your contribution limits begins to phase out at one hundred and seventy-three thousand dollars and no contributions are allowed above and income limit of one hundred and eighty-three thousand dollars. This 2012 rule represents an increase of four thousand dollars over 2011.

Finally, if your tax status if married filing separately (you lived together at least part of the year) you can only make the maximum Roth contribution if your modified AGI was zero! The phase out income range goes up to ten thousand dollars, at which point no contributions are allowed.

Check out the IRA Contribution Cheat Sheet for more, or the graph below should help.

Are you wondering how to open a Roth IRA, but not sure where to start? Everyone knows you should save for retirement and open a Roth IRA account, but so few of us actually do. The reason…perhaps it’s too difficult or you lack the information. Or perhaps it’s too time consuming or too costly. Whatever the reason for putting off the important task of setting a little aside now—to secure your financial future, it’s actually much easier than you think. Knowing how to open a Roth IRA account is one of the best things you can teach to others — and can be completed in just five simple steps.

First, consider your 2012 IRA contribution limits. The limits for 2011 & 2012 are between $5,000-6000 and can be contributed between January 2nd and the April 15th tax deadline of the following year. Be advised that contribution limits can also change from year to year, so it’s important to always stay current.

The second step is to make sure this is the best investment for you. Hint: if you don’t own any other investments…it probably is. Your financial planner can help with this. The third is to determine your eligibility. Some people are not. Fourth, select a provider and start to fund your Roth IRA. Finally, select the investment type you want for your Roth IRA.

Most people are eligible to open this type of investment. There are, however, limits on the amount of income one can earn in order to contribute to a Roth IRA. The income limits for 2011 range between $107,000 for individuals filing Head of household, Single, or Married Filing Separately and $179,000 for those filing Jointly. These limits can change from year to year, so it’s important to speak with a professional at least once each year. 2012 limits are slightly higher.

How to actually open an account is relatively simple. There are any number of providers that can help you with opening a Roth IRA and provide the proper information. Brokerage firms, mutual fund companies, banks, and even insurance companies can help. Just make sure when comparing providers to inquire about fees charged and if they have minimum investment requirements.

It’s always important to weigh all your options, get all the facts, and only then determine the investment that’s right for you. By speaking with a professional, you’ll find out how to open a Roth IRA account the easy way, get the information you need and discover the many benefits that come from saving for your future.

Do you know your Simple IRA contribution limits for 2011 and 2012? They are much different than your standard IRA contribution rules. When people contribute to a Simple IRA, as opposed to a Roth IRA contributions or traditional account they do so through employer contributions and contributions involving reductions in salaries.

Simple IRA contributions can include two different types. The first is employer contributions, which can take the form of either a non-elective payment or a matching contribution. The second type comes from the employees themselves in the form of salary deductions.

For employees, you are allowed to make salary contributions of any value into an existing Simple IRA plan as long as these deductions do not exceed limits specified by the law. The largest amount of money that an employee is allowed to contribute to a simple IRA plan in 2011 is eleven thousand five hundred dollars. This is also the maximum allowed by 2012 IRS rules.

If your employer offer an additional plan that you take part in that also includes an elective salary reduction, then additional limits apply. In particular, the Simple IRA rules dictate that total contribution to all plans in 2011 cannot exceed sixteen thousand five hundred dollars. For 2012, this amount is seventeen thousand. These amounts are not subject to individual retirement account income limits.

Employees are allowed to modify their contribution levels each year while the plan is in its election period without violating IRS rules. The election period as specified by the employer must be a minimum of 60 days in length, and employees must be notified in advance about election opportunities that are on the way. Simple IRA plans that are already in effect are required to have a yearly election period that spans the time between November 2nd and December 31st. Plans are allowed to have multiple election periods each year beyond the required 60 day election period.

Simple IRA Catch-Up Contributions

Miss your contribution in 2010 (or 2011)? Don’t worry. Employees who are at least 50 years in age are allowed to deposit additional contributions, which are also known as catch up contributions. Any employee who will reach 50 years of age at any point during the calendar year is allowed to make catch up contributions throughout the entire year in question. The simple IRA limit for catch up contributions in 2011 is two thousand five hundred dollars. Recently, the IRS announced this amount will stay the same within the 2012 rules.

Employer Contributions

For employer contributions, you must choose between non-elective or matching contributions. Employers are allowed to select either method to make their employer contributions each year. Employees who are eligible must be informed while the election period is ongoing which method of contribution will be in place for that year.

Alternatively, Simple IRA rules allow employers to make non-elective contributions. These are set at two percent of your eligible employee’s total salary. With this option, you are required to make the two percent contribution whether or not your employee participates in salary deductions. The upper salary limit to consider is set at two hundred forty-five thousand dollars in 2011 and two hundred and fifty thousand dollars in 2012.

Simple IRA Deadlines

Employers must deposit non-elective and matching contribution by the same deadline of their federal tax return. Contributions from salary reductions must be deposited within the Simple IRA at least 30 days after the employee would have normally received a paycheck.

New IRS Rules for This Year. 401k contribution limits and withdrawal rules are changing both in the years 2011 and 2012. This is important because 401ks, along with Roth IRAs, are the most popular retirement savings plans. These types of retirement plans are have similarities to regular IRA limits in that they plans are administered in the financial sector, but regulated by the Internal Revenue Service (IRS).

Employees determine the percentage of their gross salary they wish to contribute to their account, and during the payroll cycle each pay period, that percentage is placed into the employee’s personal 401k account. Understanding the maximum contribution limits will greatly influence the investment choices each employee makes. Unlike contribution rules for SEP IRAs, certain 401k rules in 2011 and 2012 apply to all retirement plans, including: participant eligibility and withdrawal rules.

Do you have a safe harbor or traditional 401k plan? These are both treated the same. For the 2011 tax year, the maximum contribution to either a traditional 401k or a safe harbor plan is sixteen thousand five hundred dollars. For 2012, the IRS has raised this limit to an even seventeen thousand dollars. After 2012, these amounts will be determined by cost of living adjustments, as determined by the Internal Revenue Service.

Different rules apply to SIMPLE 401(k) plans, (not to be confused with Simple IRA limits) These limits are much lower than traditional 401k contributions. For both the 2011 and 2012 tax years, the maximum you can add to a SIMPLE 401k is eleven thousand five hundred dollars. These are subject to the same cost-of-living adjustments in future years.

Be sure you know your 401k deadlines. It’s important to note that these are universal contribution limits, but your specific plan may have its own requirements which limits the amount of salary you can defer.

401k catch up contributions are another important point to consider if you want to build up your investments. The IRS allows catch up contributions only to those participants who are fifty years of age or older. If your plan allows for catch up contributions, this allows you to exceed the normal 401k limits that you would otherwise have to follow.

For both traditional and safe harbor 401k plans, the catch up contribution allows for an additional five thousand five hundred dollars in 2011 and 2012. SIMPLE 401k plans allow for an additional two thousand five hundred dollars in 2011 and 2012.

Notes about Early Withdrawal. You may make early withdrawals from your 401k, but this will be considered taxable income. If you make the early withdrawal before reaching age 59 1/2, then an additional ten percent penalty tax will be applied. The 59 1/2 age limit doesn’t apply if you retire early and are at least 55 years old. It also doesn’t apply under certain circumstances such as death, becoming disabled and certain hardship circumstances.

Certain events are considered hardships and covered by special rules under the IRS code, including: medical expenses, damage to primary residence, educational expenses, and funeral expenses. At the age of 70½ years or when employment ends, the retiree is required to begin drawing funds and paying tax on the withdrawals.

Contact your financial adviser for assistance in evaluating the participating funds within the 401k where your distribution will be invested. Guessing at where to invest your money is not the way to optimize your returns. Market ups and downs can add unnecessary worry about long-term investments. Monitor the performance of your 401k on a semi-annual basis, but do not watch it too closely each quarter.

This article covers 2011 Roth IRA income limits for contributions. For 2012, see the article 2012 Roth rules.

As it turns out, 2011 is a big year for IRAs because of a current rule that allows for rollovers from traditional IRAs to the more desirable Roth IRAs. For this reason, it is important to know the difference between your Roth IRA contribution limits as opposed to traditional IRA limits. See the above link for slightly different rules that apply to 2012. Just as a reminder, the difference between traditional and Roth IRAs is whether you are contributing pre-tax dollars or after-tax dollars.

Income limits are important for the very reason that give Roth IRAs their advantage over traditional accounts. In both cases, the IRA is meant to help individuals save for retirement by conferring special tax benefits. In a traditional IRA, an individual under 50 can withdraw up to the contribution limit of five thousand dollars from his or her yearly income, in effect counting as a tax-deductible contribution. This means the individual is only taxed on the income leftover after funding the IRA. When it comes time to take distributions, the distributions will be taxed at ordinary income (which isn’t so great).

In contrast, the Roth is a much better choice for most investors. However, there are two types of Roth rules that restrict the usage of this great benefit: Roth IRA contribution limits and income limits.

The maximum Roth IRA limit for 2011 is the same as for the traditional IRA. This means five thousand dollars for an individual under the age of fifty and six thousand dollars for an individual over the age of 50). Take note, these are completely different than SEP limits. In addition, there is an income limit that starts to phase out an individual’s ability to contribute anything to this tax-free retirement vehicle. The government is only interested in helping taxpayers without a high income to provide for their own retirement by saving and investing in a Roth IRA. Instead of letting the rich take advantage of this, the government set an income limit.

Roth IRA income limits for 2011

For single filers, once your modified AGI (adjusted gross income) has hit one hundred and seven thousand dollars, the amount they can contribute to a Roth individual retirement account is slowly phased out until your income reaches one hundred and twenty-two thousand dollars.

For those who are married and filing jointly, the range is between one hundred sixty-nine thousand and one hundred and seventy-nine thousand dollars. This means that if their yearly income is below either minimum threshold, they may contribute up to the full amount, but by the time they’ve hit the maximum threshold, they are no longer eligible to contribute any income that year.

If you are married and filing separately, the outlook is less than rosy. Your AGI must equal zero dollars in order to make the maximum Roth contribution, and the phase out range only goes to a ten thousand dollar ceiling.
 

SEP IRA contribution limits for 2011 and 2012 are changing. SEP’s are Simplified Employee Pension (plans).  You can benefit from a SEP IRA if you own a small business or are self-employed.  The federal government rules let you use an SEP plan as an easy way to contribute to your employees’ retirement savings or your own retirement.

The SEP IRA account has many, many benefits for the self employed looking to save for retirement.  They include high deduction limits, flexibility in administration, high income through tax deferred growth, and complete flexibility in contribution limits.  To find out more, talk to a qualified retirement specialist. This article covers the maximum IRA limits on these accounts.

Here are the SEP Rules for 2011 and 2012. For 2011, the maximum you can contribute to an eligible SEP IRA is set at forty-nine thousand dollars, or twenty-five percent of the employee’s salary, whichever is smaller. So for an employee who is compensated one hundred thousand dollars, the maximum SEP contribution is twenty-five thousand. Only the first two hundred and forty-five thousand dollars of an employee’s compensation can be considered when making this calculation.

In 2012, the IRS has raised the contribution limit to fifty thousand dollars, or twenty-five percent of the employee’s salary, whichever is the smallest. These limits are subject to future cost-of-living adjustments as the years go by. Also in 2012, the first two hundred and fifty thousand dollars of an employees compensation may be considered.

It’s important to note these are employer limits, and don’t apply to the employees (participants) themselves. As an employee, if your SEP IRA allows for non-SEP contributions, then you can make tax-deductable contributions up to your maximum IRA limit – generally five or six thousand dollars, depending on your age.

Typically, SEP IRA accounts are established by businesses with only a single employee, the owner.  This means a sole proprietorship or a corporation with only a single owner/worker.  The flexibility of the rules allows you to set it up this way.

SEP IRA Rules for the Self-Employed

If the salary from your business comes in the form of a W-2, your SEP IRA contribution is limited to the standards above. But what are the contribution limits for non W-2 (personal) income? In these situations, the same limits apply, but the IRS sets special guidelines to determine out the maximum contribution. See the worksheet in chapter 5 of IRS publication 560 for an explanation.

There are no catch-up provisions provided for SEP IRAs.

SEP IRA Contribution Deadlines. The deadline for SEP contributions for employers is the same as the date it’s taxes are due for the year. Extensions apply!

The exact rules for setting up and governing a SEP account in 2011 and 2012 are much more complex than a regular IRA. And the penalty for making a mistake when opening your IRA can be high.For more information on establishing a SEP account for your business, read the IRS publication for more specific instructions.

In July of 2011, the Worker’s Retirement Institute reported that the average value of IRAs (Individual Retirement Accounts) in the United States fell to less than $28,000 – the lowest number in a decade. This means Americans, some unemployed, must work even harder to pay for their retirement.

The sad part is that most people’s retirement savings are dismal because of silly IRA mistakes that cost real money.  Individual Retirement Accounts confuse people, but many workers miss out on tens of thousands of dollars in their lifetime because of common errors.

How many of these 5 mistakes do you make with your IRA?

5.  Not Comparing Roth vs. Traditional IRAs

What?  You still don’t know the difference?  Don’t worry.  If you set your IRA up years ago, your bank or financial planner likely set you up with a Traditional IRA.  Today, a Roth IRA can offer significant tax advantages to most people.  This isn’t true in every case, but in the long run a Roth IRA offers a better tax position when you eventually retire.  If you’re just starting an IRA and don’t have the time to research, go with a Roth. (Self-employed business owners should look into the benefits of SEP accounts.

4.  Thinking you Missed the Deadline

Most people think 2010 ends on December 31^st. Nope!  Every year, the government gives you until April 15^th, the day most taxes are due, to make your maximum IRA contribution for the previous year.  Don’t forget to make your contribution before you file those taxes.  Also, did you know you can deposit your tax refund directly into your IRA?

3.  Not Reaching the IRA Contribution Limits

Along with your 401k, your IRA is your most important investment vehicle for retirement. The more you contribute each year, the more you save in taxes and the larger your retirement savings.  Because of the magic of compound interest, shorting your IRA even a few hundred dollars this year can mean the difference of thousands of dollars later on. The IRA contribution limits for 2010 are $5,000.  IRA owners age 50 or older can make an additional $1,000 “catch-up” contribution in 2011.  Also, know the maximum you can contribute based on your income by reading about maximum income limits for Individual Retirement Accounts.

2.  Early Withdrawal

You already know that IRAs are designed not to be touched until you turn 59 ½.  Doing so will incur the wrath of the IRS and you’ll be forced to pay taxes on income and investment earnings.  But if circumstances demand that you withdrawal the money, be sure to put it back within 60 days to avoid penalties.  Most people don’t realize that federal regulations give you a 60 day grace period to pay back any IRA savings that you withdrew.

1.  Procrastinating

If you’re reading this and thinking about starting an IRA, the best time to do is today.  Putting your retirement plans off until tomorrow can cost you more than all the other mistakes combined.  There is always an excuse and never enough cash flow.  But by waiting you are dooming yourself to repeat the mistakes of yesterday.  Talk to a qualified financial planner today!

Essential Information for 2011/2012. Do you know someone with a traditional IRA? Be sure to bookmark this page for reference. The rules governing your maximum IRA income limits for 2011 & 2012 vary based on the type of IRA you have, your income and your filing status. It’s important to note that this is not the same thing as your 2012 IRA contribution limits. If you are contributing to multiple accounts, it is best to contact a qualified accountant or investment expert if you think you are close to the limits. This way you might avoid costly mistakes.

For Traditional IRAs, income limits are also known as deduction limits. These refer to the amount of your contribution that can be deducted from you income before taxes are applied. This is different Roth IRA income limits, which sets a ceiling on the amount you can contribute up front to a Roth IRA account, based on your income.

In both 2011 & 2012, traditional IRA income limits changed from previous years. The maximum limits for your traditional IRA is based on you adjusted gross income, or AGI. To further complicate things, the amounts vary depending upon whether or not you are covered by a retirement plan at your job.

If you are covered by a retirement plan at work, then the following income limits apply for 2011.
Jump to 2012 Income Limits

• If your filing status is head of household or single, your IRA tax deduction starts to phase out when your AGI reaches $56,000 and completely disappears when you reach $66,000.
• If you and your partner file are married filing jointly, the IRA deduction begins to phase out when you reach $90,000 and tops out at $110,000. This represents an increase of $1000 from 2010.
• And if you are married filing separately, apparently the government doesn’t like you because the deduction phases out at less that $10,000 and you get no deduction whatsoever if your AGI exceeds $10,000.

If you are not participating in a retirement plan at your place of employment then the rules governing your traditional IRA income limits change.

• If you are single or filing as a head of household, no income limits apply.
• If you are married filing jointly and your spouse also doesn’t participate in an employer based retirement plan, then still no income limits apply.
• But, if you are married filing jointly and your spouse is covered at work, then your deduction limits start phasing out at an AGI of $169,000 and top out at $179,000.
• Again, if you are married filing separately, you’re pretty much toast because the deduction limits start out at less than $10,000.

Tradition IRA Income Limits for 2012

For 2012, the IRS has increased these limits for most income brackets between two to four thousand dollars.

If you are covered by another plan at work for the 2012 tax year, the following income traditional IRA income limits apply.

If you are not covered by another plan at work, use the following table to estimate your income limits.