Contribution Limits

• You must have taxable compensation in order to contribute to an IRA, and the amount of your contribution cannot exceed the amount that you earned. Additionally, the IRS regularly updates the maximum allowable contribution to a regular IRA, also known as a traditional IRA. Currently, the IRA contribution limit is $5,000, with an extra $1,000 allowed if you are age 50 or older. In the special situation where you participate in a 401(k) plan with an employer who went bankrupt, the contribution limit rises to $8,000.
  
  

Deduction Limits

• Contributions to a traditional IRA are typically made on a pre-tax basis, meaning you can take a tax deduction at the time you make your contribution. However, the IRS limits the amount of your deduction based on your modified adjusted gross income, or MAGI, if you are covered by a retirement plan at work. If you are married filing jointly and your MAGI is $166,000 or less, you can take a full deduction. With an MAGI of $176,000 or more, you cannot take any deduction. For incomes in between this range, your deduction is phased out. The IRS spells out the deductibility of contributions for all filing statuses in IRS Publication 590.
  
  

Distribution Age Limits

• An IRA is meant to hold long-term investments, and the IRS assesses a penalty if you do not use the account for long-term savings. You must pay a 10 percent penalty, in addition to income tax, on any withdrawal you take before you reach age 59 1/2.
  
  

Accumulation Age Limits

• Although the IRS encourages you to keep your savings in an IRA for the long term, you must begin to take distributions at some point. By April 1 of the year after you turn 70 1/2, the IRS requires you to begin taking at least a minimum amount every year. The amount of your distribution varies from year to year based on your age and your account value. Tables for helping you determine the amount of the distribution are found in Appendix C of IRS Publication 590.