IRA Information Guide To Making Your Contributions

Your IRA contributions can earn tax-sheltered growth and tax deductions to your earnings. However, the IRA should be understood properly before one can maximize its benefits; thus getting IRA information is a must.

One of the IRA information you should know is that there are several types of IRAs; the most common contribution requirement for all IRA contributions is the existence of an earned income. The amount of your contributions must not go beyond the amount of your earned income and the limits for IRA contributions set by the IRC.

From 2002 until 2004 maximum allowable IRA contributions for both Traditional and Roth IRA types was up to $3,000. Starting 2008 and beyond the 2001 Tax Act or the Economic Growth or Tax Relief Reconciliation Act increased the allowable IRA contributions to $5,000. Here a re a few IRA information guidelines for your contributions:

• For Education IRA

The Maximum allowable IRA contribution is pegged at $2,000 annually. If you are a single-filer and your Modified Adjusted Gross Income or MAGI is below $95,000 or your spouse are joint filers and has MAGI at a range of $190,000-$220,000 you can contribute up to the maximum amount of $2,000.

• For 401k Plan

There are two types of limits for IRA contribution. The first limit is the one marked by your employer and the other 401k contribution limit is the one set by the Internal Revenue Service or IRS.

• For the Government's 401k contribution limit

A contribution of $15,500 for those below 50 years old is allowed while a $20,500 catch-up contribution limits for those over 50 has been set. The reason for the catch-up contribution is the presumption that when you reach 50 years of age, your earning ability can very well compensate for an increase in your contributions.

• Another type of 401k contribution limit is the one set by the employer.

An employer can set-up limits for your contributions; for example if you are a 35-year old employee receiving $40,000 in compensation and your employer sets a maximum allowable contribution of 10% of your compensation, it means your maximum 401k contribution limit is only marked at $4,000 even though there is a higher IRS limit.

• For Simple IRA contributions

The employee may not be required to make regular IRA contributions to their SIMPLE plan. An employer is required to make certain minimum contributions to the plan.

Another important IRA Information is that there are two types of Simple IRA contributions; the first is salary deferral which can go up to 100% of the employee's compensation but must not exceed at $10,000 for 2006, $10,500 for 2007, catch up contributions for plan investors over the age of 50 is pegged at $12,000 for 2006 and $13,000 for 2007.

Their Simple IRA contribution may either match the employees' IRA contributions dollar for dollar up to 3% but is subject to limitations pegged at a maximum of $10,500(2007) and for investors over 50 years limit is set at $13,000(2007).

Or the company may pay a flat 2% of compensation for each employee receiving at least a compensation of $5,000 a year regardless of what amount the employee contributes.

For Rollover IRA contributions, there are two kinds: the first one is a Direct Rollover, which involves the rolling over of funds from an employer sponsored retirement plan. The second type involves an IRA to IRA rollover; an individual within 60 days after receipt of the distributed assets can roll it to another IRA.

Knowing the pertinent IRA information can help you make the most out of your contributions. IRA information an also help you avoid the penalties provided by law in certain cases. You can make IRA contributions either to your personal account or in another IRA or an employer's qualified plan. In a personal account the deposit type is made through contributions and the mode of depositing is strictly through cash.

Ira Contribution