Looking to Learn More? Sign up for our Investing Insights newsletter. Subscribe

Thanks for Signing Up!

Be sure to check your inbox for the Investing Insights newsletter to get the latest news and insights from Thrivent Mutual Funds.

Well that's unexpected - your subscription request was not submitted. Please try again.

Great news - you're on the list!

Looks like you're already on our mailing list. Be sure to check your inbox for the Investing Insights newsletter to get the latest news and insights from Thrivent Mutual Funds.

couple reviewing IRA contribution rules and limits with someone

Here are the 2018 and 2019 rules and contribution limits to help you get the most out of your IRA. (See: Contribution and Deduction Limits & Rules for IRA and CESA or IRS.gov for more details):

Who qualifies?

You can contribute to an IRA if you (or your spouse, if filing jointly) have “taxable compensation,” also known as “earned income.” The following table shows what types of income would be considered “taxable compensation” and which types would not.

 

Compensation for Purposes of an IRA

Includes:

  • wages, salaries, etc.
  • commissions
  • self-employment income
  • alimony and separate maintenance
  • nontaxable combat pay

Does Not Include:

  • earnings and profits from property
  • interest and dividend income
  • pension or annuity income
  • deferred compensation
  • income from certain partnerships
  • any amounts you exclude from income

How much can I contribute?

For the 2018 tax year, you can contribute the lesser of $5,500 (or $6,500 if you’re age 50 or older by the end of the year) or your taxable compensation for the year. For the 2019 tax year, you can contribute the lesser of $6,000 (or $7,000 if you’re age 50 or older by the end of the year) or your taxable compensation for the year. 

This is the maximum amount you can contribute across all your traditional and Roth IRAs. Note that Roth contributions may be limited if your earnings exceed certain limits. See below for details.

Can my spouse contribute?

Even if your spouse doesn’t work, he or she can contribute to an IRA if you’re a wage-earner. But there are limitations.

Again, you can’t contribute more than you make in taxable compensation. But if you make over $11,000 (or $13,000 if you both are over 50), you may be able to contribute the full amount for each of you to a traditional IRA. In other words, for those under 50, that would come to $5,500 per spouse for a total of $11,000 for 2018 (or $6,000 per spouse for a total of $12,000 in 2019).

However, keep in mind that you can’t contribute the maximum to a traditional IRA and still contribute to a Roth IRA. If you and your spouse contribute the maximum of $11,000 (or $12,000 for 2019) to traditional IRAs, you would not be able to contribute to a Roth IRA during the same tax year. 

When should I make contributions? 

Contributions can be made to your IRAs at any time during the calendar year and as late as the due date for filing your tax return (which is usually on or around April 15 of the following year). (See: Contributing Earlier to Your IRA Can Make a Big Difference Over Time)

That means that even if you didn’t make a traditional IRA contribution during the past year, you may still contribute this year as long as you make the contribution by the April filing deadline. That could reduce your taxes on your previous year’s returns. 

Are there age restrictions?

You must stop contributing to a traditional IRA during the year that you turn 70 ½. 

However, you may still be able to contribute to a Roth IRA, which carries no age restrictions. Although you would not benefit from current year income tax savings, a Roth IRA would offer both tax-free growth of principle and, when qualified, the tax-free withdrawal of your funds. 

Are there upper income restrictions?

There are no upper income limitations on contributing to a traditional IRA, although there are income restrictions for contributing to both an IRA and a 401k plan at work (see next section). However, there are restrictions for a Roth IRA. 

Married and filing jointly or qualifying widow(er) Your modified adjusted gross income What you can contribute
  less than $189,000 in 2018 and less than $203,000 for 2019 up to the limit
  greater than or equal to $189,000 but less than $199,000 in 2018 and greater or equal to $193,000 but less than $203,000 in 2019 a reduced amount
  greater than or equal to $199,000 in 2018 or greater than or equal to $203,000 for 2019 zero
Married filing separately and you lived with your spouse at any time during the year
Your modified adjusted gross income What you can contribute
  less than $11,000 in 2018 or less than $12,000 in 2019 a reduced amount
  greater than or equal to $10,000 zero
Single, head of household, or married filing separately and you did not live with your spouse at any time during the year
Your modified adjusted gross income What you can contribute
  less than $120,000 in 2018 and less than $122,000 for 2019 up to the limit
  greater than or equal to $120,000 and less than $135,000 for 2018 and greater than $122,000 and less than $137,000 for 2019 a reduced amount
  greater than or equal to $135,000 for 2018 and greater than or equal to $137,000 for 2019 zero

What if you have a 401k plan at work?

If you already have a 401k plan at work, or are covered by another type of retirement plan (such as a pension, profit-sharing or SEP plan), your ability to benefit from a tax deduction due to your traditional IRA contribution would depend on your taxable income and filing status. (See: Contribution and Deduction Limits & Rules for IRA and CESA)

If you earn above these income restrictions and you still want to contribute to an IRA, opening a Roth may be a better option than a traditional IRA if you meet the Roth income limits. Although a Roth IRA wouldn’t provide a tax benefit for the current year, it would grow tax-deferred, and you would have the benefit of tax-free qualified withdrawals later, whereas traditional IRA withdrawals are taxed.  

What are the penalties for early withdrawal?

All contributions and earnings you withdraw from your traditional IRA are taxable. If you are under age 59 ½ you may also have to pay a 10% tax for early withdrawals, unless you qualify for an exception.

Take advantage of tax contribution limits and Open a Thrivent Funds IRA today.

 

At Thrivent Mutual Funds, we recommend you consult your tax advisor to make sure you’re getting the most out of your investments. Thrivent Mutual Funds and their representatives cannot provide legal or tax advice.


1 Most years the deadline is April 15, but the deadline was moved to Tuesday, April 17 for 2018. 

Well that's unexpected - your subscription request was not submitted. Please try again.

Gain From Our Perspective

Get Our Investing Insights Newsletter in Your Inbox.

SUBSCRIBE NOW

Gain From Our Perspective

Get Our Investing Insights Newsletter in Your Inbox.

SUBSCRIBE

Thanks for Signing Up!

Be sure to check your inbox for the Investing Insights newsletter to get the latest news and insights from Thrivent Mutual Funds.

Great news - you're on the list!

Looks like you're already on our mailing list. Be sure to check your inbox for the Investing Insights newsletter to get the latest news and insights from Thrivent Mutual Funds.

Ready to Invest?