Individual retirement accounts (IRAs) were introduced in 1974. Anyone with earned income can make the maximum traditional IRA contribution as long as they had at least that much income in a given year. A non-working spouse can establish his/her own traditional IRA if the earned income of the working spouse equals or exceeds the total contributions to both partners’ IRAs. From 1974 until 1980, the limit for contributions was $1,500 per individual.
From 1981 until 2001, it was $2,000. The IRS raised the contribution limit for individuals under 50 years old to $3,000 in 2002 through 2004, then to $4,000 in 2005 and 2006, and $5,000 in 2008 through 2011. Starting in 2002, individuals 50 years old and older were allowed to make higher "catch up" contributions to their traditional IRAs. In 2002, the IRS established "catch up" contributions for traditional IRAs at $3,500. In 2005, it was raised to $4,500, $5,000 in 2006, and $6,000 in 2008, which is still the current limit in 2012.
Individuals can no longer make contributions to traditional IRAs once they reach the age of 70½ years. This differs from Roth IRAs that allow contributions at any age as long as someone has earned income. Roth IRAs were established by the Taxpayer Relief Act of 1997 and first available in 1998. The total contributions allowed per year to all IRAs cannot exceed the amounts previously mentioned. For more information on IRAs, see Publication 590 on the IRS Web site at www.irs.gov or the retirement planning articles on www.extension.org.
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