Maximum Contributions

• As you approach 50, retirement planning enters its last stage of saving and accumulating assets. In 2002, legislative changes allowed IRA owners to have an increased contribution limit in what was named a "catch-up contribution." Back then, the catch-up contribution was $500. As of 2011, the catch-up contribution is $1,000, making total contribution limits $6,000 for any IRA owner at least 50 years of age. These catch-up contributions will be indexed for inflation in future calendar years in $500 increments.
  
  

Earning Qualifications

• Having a higher contribution limit doesn't automatically make you eligible for the full contribution. You must have earned wage or salary income in order to make a contribution. The contribution amount cannot exceed 100 percent of your income; if you make $4,000 for the year, that is your maximum contribution amount regardless of catch-up limits. Additionally, Roth IRAs have adjusted gross income limits determining whether you can make a full or partial contribution. The IRS maintains phase-out ranges; $107,000 to $120,000 for single tax filers and $169,000 to $179,000 for married couples filing joint returns. If you are below the phase-out range, make a full contribution. Exceeding the range cap means no contribution is allowed while those within the range are allowed to make partial contributions.
  
  

Required Minimum Distribution

• Traditional IRAs are tax-deferred, meaning an income tax deduction was taken when money was put in the account. As money is distributed from the traditional IRA, it is added to income and taxed. Uncle Sam seeks his share of taxes at some point, even if you don't need the traditional IRA funds. He gets this by way of the Required Minimum Distribution that starts at age 70.5 for traditional IRA owners. The Roth IRA is not a deductible account and provides tax-free distributions. Uncle Sam has no benefit in mandating distributions and thus doesn't require it from a Roth IRA. This keeps IRA tax-free growth in tact and also allows you to continue making contributions beyond age 70 1/2. You can't do that in a traditional IRA.
  
  

Considerations

• There are many factors to review when planning for retirement. You must anticipate future retirement income needs, resources and growth rates. Tax brackets change based on legislative adjustments. What is a benefit today might not be tomorrow. If you are covered by an employer's retirement plan, look at the benefits of tax-deferred growth versus tax-free. Just because you can put more into a Roth doesn't mean you should. You might get a greater savings benefit by contributing more into a 401k and having your employer match those funds, giving you free retirement money. It is best to speak with a tax adviser to navigate the many scenarios that affect your existing tax situation and future retirement needs.