General Rules

• The IRS sets an annual limit to IRA contributions. You may place the money in any combination of Roth or traditional accounts, but you cannot exceed the lesser of the maximum allowable contribution limit -- $6,000 for 2010 -- or your annual taxable compensation.
  
  

Over 50 Catch-Up Rules

• If you will be age 50 or older at the end of the tax year, you are eligible to contribute an additional $1,000 to any combination of IRAs. This is separate from any catch-up contributions you make to an employer-sponsored retirement account such as a 401k plan.
  
  

Roth IRA Restrictions

• Roth IRAs have a phase-out restriction in which the maximum allowable contribution is lowered for people with higher incomes. This restriction is based on a modification of the adjusted gross income, or AGI, from your 1040 tax form. For single taxpayers in 2010, a modified AGI between $105,000 and $120,000 resulted in a lower maximum. Those single taxpayers with a modified AGI greater than $120,000 were not allowed to contribute. See IRS Publication 590 for specific instructions on how to calculate your modified AGI.
  
  

Modified AGI and Employer Retirement Plans

• If you or your spouse are eligible to contribute to an employer-sponsored retirement plan such as a 401k, there are limits to the amount of your traditional IRA contribution that you can deduct on your taxes. If you are a single taxpayer with an employer retirement plan, in 2010 your deduction was reduced for modified AGIs between $56,000 and $66,000, and eliminated for amounts over $66,000. This limit is not applicable to Roth IRAs.
  
  

Other Conditions and Restrictions

• If your employer went into bankruptcy while you were participating in the employer-sponsored retirement plan, you may be eligible to contribute a larger amount to an IRA. See IRS Publication 590 for details about this option. You do not have to contribute the full allowable amount every year, or split it between the accounts in the same way each year.