Investing Basics
IRAs: Eligibility and Contribution Limits

Before opening an IRA, check to make sure you are eligible. Also, be sure your total annual contributions do not exceed the annual contribution limit.

Annual Contribution Limit: For all of your Roth and Traditional IRAs for tax year 2010, the annual limit is the lesser of 100% of your earned income or $5,000 ($6,000 if age 50 or above).

Traditional IRA
Eligibility Requirements: To be eligible to contribute to a Traditional IRA, you or your spouse must have earned income — wages — and you must be below age 70 ½.

Deductibility Test: Depending on your income and whether you and/or your spouse participate in an employer-sponsored retirement plan, your contribution may not be deductible.

If neither you nor your spouse participates in an employer-sponsored retirement plan, your entire contribution to a Traditional IRA may be deductible.

If you participate in an employer-sponsored retirement plan, the deductibility depends on your annual income and tax-filing status. For tax-year 2010, IRA contributions for single filers with an adjusted gross income of $56,000 to $66,000 or below and those married filing jointly with an adjusted gross income of $89,000 to $109,000 or below may be partly or entirely deductible.

If you do not participate in an employer-sponsored retirement plan but your spouse does, your contribution for tax-year 2010 is phased out if your modified AGI is more than $167,000.

Roth IRA
To be eligible to make the full contribution to a Roth IRA for tax year 2010, you must have taxable compensation and your adjusted gross income must be less than $167,000 (joint filers) or $105,000 (single filers). If your income is higher, you may be able to make a partial contribution. There is no age restriction.

For more complete information, including a comparison of a Traditional IRA to a Roth IRA, read the downloadable Helpful Tips guide, Building your Retirement Savings.

Conversions to Roth IRAs: Beginning in 2010, the modified adjusted gross income and filing status requirements for converting a Traditional IRA to a Roth IRA are eliminated. Also, for any 2010 conversion from a Traditional IRA to a Roth IRA, any amounts that would be included as income will be included in income in equal amounts in 2011 and 2012. You can choose to include the entire amount in income in 2010.