IRA Owners Benefit from New Tax Law

If you have an individual retirement account, there’s good news. The recent tax legislation contains provisions to help you "grow" your account faster. Starting next year, you’ll be able to contribute more to your traditional and/or Roth IRA. The $2,000 annual limit on total contributions to these accounts is increasing to $3,000 for years 2002 through 2004, and $4,000 for years 2005 through 2007.

Starting in 2008, the maximum will be $5,000, subject to future inflation adjustments. To be eligible to contribute, you (or your spouse) must have compensation at least equal to the amount of your contribution.

Once you’ve reached age 50, you can boost your IRA savings even more by making "catch-up" contributions. The annual catch-up allowance, which is $500 for years 2002 through 2005, grows to $1,000 a year in 2006 and after.