Contribution Limits

       The maximum amount you can contribute to a 457 plan depends on your age and the details of the plan. These are the correct 457 plan contribution limits for 2009 and 2010. Contributions to qualified retirement plans (401(k), 403(b), SIMPLE, or SEP) do not affect your 457 plan contribution limits. You cannot contribute more than 100% of your compensation.

• Under age 49 at the end of the year: $16,500

 

• Age 50 or older by the end of the year: $22,000 (only in governmental 457 plans, otherwise the limit is $16,500)

Special 457 Plan Catch-up Contributions

       If you are within 3 years of normal retirement age as defined by the 457 plan, you may be eligible to contribute up to an additional $16,500 per year. However, this special catch-up contribution is limited to your unused regular contribution limits from previous years. If you’ve contributed the maximum every year you’ve been in the plan, you won’t qualify for this special catch-up contribution. For more information, be sure to speak with your human resources department and consult the IRS website here and here.

Deadline for Contributions

       Elective contributions are generally made from your paycheck, so you need to have your contributions set up within the year. You can choose to contribute everything at the beginning of the year if your plan allows it, or you can just contribute a certain amount or percentage from each paycheck.

Tax Deduction for Contributions

       Your contributions to a 457 plan reduce your taxable income, so you do not need to claim a tax deduction on your return. However, you may be eligible for the Retirement Savings Contribution Credit if you contributed to a governmental 457 plan. Non-governmental 457 plan contributions will not qualify for that credit.

Contribution Limits

       The maximum amount you can contribute to a 403(b) plan depends on your age and years of service. These are the correct 403(b) plan contribution limits for 2009 and 2010. This limit can be split between multiple qualified retirement plans (401(k), 403(b), SIMPLE, or SEP), but the combined total of your contributions cannot exceed this limit. You cannot contribute more than 100% of your compensation.

• Under age 49 at the end of the year: $16,500

 

• Age 50 or older by the end of the year: $22,000

15 Year Rule

       If you have 15 years of service with a qualified organization, you may be eligible to contribute up to an additional $3,000 per year to your 403(b) plan. However, the rules for this can get tricky, so you should speak with the human resources department at work and read the IRS explanation of the 15 year rule.

Deadline for Contributions

       Elective contributions are generally made from your paycheck, so you need to have your contributions set up within the year. You can choose to contribute everything at the beginning of the year if your plan allows it, or you can just contribute a certain amount or percentage from each paycheck.

Tax Deduction for Contributions

       Your contributions to a 403(b) plan reduce your taxable income, so you do not need to claim a tax deduction on your return. However, you may be eligible for the Retirement Savings Contribution Credit.

Contribution Limits

       The maximum amount you can contribute to a 401(k) plan depends on your age. These are the correct 401(k) plan contribution limits for 2009 and 2010. This limit can be split between multiple qualified retirement plans (401(k), 403(b), SIMPLE, or SEP), but the combined total of your contributions cannot exceed this limit. You cannot contribute more than 100% of your compensation.

• Under age 49 at the end of the year: $16,500

 

• Age 50 or older by the end of the year: $22,000 (only if your plan permits catch-up contributions)

Deadline for Contributions

       Elective contributions are generally made from your paycheck, so you need to have your contributions set up within the year. You can choose to contribute everything at the beginning of the year if your plan allows it, or you can just contribute a certain amount or percentage from each paycheck.

Tax Deduction for Contributions

       Your contributions to a 401(k) plan reduce your taxable income, so you do not need to claim a tax deduction on your return. However, you may be eligible for the Retirement Savings Contribution Credit.

       If you’ve made any IRA contributions, you’ll want to keep a record of those in case you ever need to prove it to the IRS. The best record you can have for an IRA contribution is a Form 5498. The custodian of your IRA is required to file this form with the IRS and send you a copy as well. Form 5498 will show any contributions or conversions you’ve made as well as the required minimum distribution (RMD) if applicable. You should receive this form in May or June.

       By keeping a copy of your Forms 5498, you’ll have a record of your IRA contributions. This is especially handy if you ever take an early distribution from a Roth IRA, convert a traditional IRA to a Roth IRA, or make any nondeductible contributions. If the IRS ever questions the information you file when you do one of those actions, you’ll be able to back up your data with those Forms 5498.

       If you lose a Form 5498 or never receive it, simply contact the custodian of your IRA. They should be able to send you a copy for any year they maintained your IRA. While it’s nice to know that, don’t count on your custodian to always have the information you need. You’re best off keeping the records yourself (in an organized manner…) than relying on your custodian to have them for you.

       So that’s what you need to keep if you make any IRA contributions. It may sound trivial, but it can save you from future headaches. If you have any questions, let me know in the comments!

Contribution Limits

       The maximum amount you can contribute to a Roth IRA depends on your age and income. These are the correct Roth IRA contribution limits for 2009 and 2010. This limit can be split between a Traditional IRA or Roth IRA, but the combined total of your contributions to your Traditional and Roth IRAs cannot exceed this limit.

• Under age 49 at the end of the year: $5,000

 

• Age 50 or older by the end of the year: $6,000

Income Limits

       You are only eligible to contribute to a Roth IRA if your adjusted gross income (AGI) falls under certain limits. These limits depend on your tax filing status.

• Married Filing Jointly or Qualifying Widow(er): You can make a full contribution if your AGI is less than $166,000 (or $167,000 in 2010). If your AGI is more than $176,000 (or $177,000 in 2010), you cannot make a contribution to a Roth IRA. If your AGI is between $166,000 and $176,000 (or between $167,000 and $177,000 in 2010), then the amount you can contribute is reduced proportionately.

 

• Married Filing Separately but you lived with your spouse at any time during the year: If your AGI is more than $10,000 (same in 2010), you cannot make a contribution to a Roth IRA. If your AGI is between $0 and $10,000 (same in 2010), then the amount you can contribute is reduced proportionately.

 

• Single, Head of Household, or Married Filing Separately and you did not live with your spouse at any time during the year: You can make a full contribution if your AGI is less than $105,000 (same in 2010). If your AGI is more than $120,000 (same in 2010), you cannot make a contribution to a Roth IRA. If your AGI is between $105,000 and $120,000 (same in 2010), then the amount you can contribute is reduced proportionately.

Deadline for Contributions

       Contributions for a year can be made any time that year or until the due date of your tax return for that year. Contributions for 2009 must be made between January 1, 2009 and April 15, 2010. Contributions for 2010 must be made between January 1, 2010 and April 15, 2011. You can designate for which year (current or previous) you are making contributions if you contribute between January 1 and April 15.

Tax Deduction for Contributions

       There is no tax deduction for Roth IRA contributions. However, you may be eligible for the Retirement Savings Contribution Credit.