When It Comes to IRAs, Know Your Limits
In recent years, IRAs have become the single largest vehicle for retirement savings in the United States. At the end of 2007, IRAs held $4.8 trillion in retirement savings, whereas employer-sponsored defined-contribution plans like the 401(k) held $3.5 trillion and defined-benefit plans (traditional pensions) held $2.3 trillion. As a retirement savings vehicle, the IRA has become more attractive with age. When IRAs were created in 1974, the annual contribution limit was $1,500. In 2009, workers can contribute up to $5,000 to all IRAs combined, and those 50 and older can contribute an additional $1,000 in catch-up contributions. Contributing the maximum…