Carl, age 44, wants to contribute the maximum allowed to a Roth IRA. He is single and his AGI is $124,000. How much can he contribute to the Roth IRA?
A) $5,500
B) $4,033
C) $2,000
D) $1,467 AGI Phase-Out Ranges for 2018 IRAs

Question

Carl, age 44, wants to contribute the maximum allowed to a Roth IRA. He is single and his AGI is $124,000. How much can he contribute to the Roth IRA?
A) $5,500 
B) $4,033 
C) $2,000 
D) $1,467 AGI Phase-Out Ranges for 2018 IRAs

Quizplus · Accepted Answer

The maximum contribution for 2018 for those between ages 40 and 49 is $5,500. However, because Carl's AGI is above the phase-out range, his contribution limit is reduced. The phase-out range for single filers in 2018 is $120,000 to $135,000. To calculate his reduced contribution limit, subtract Carl's AGI from the upper limit of the phase-out range and then multiply by the maximum contribution limit ($5,500): ($135,000 - $124,000) x $5,500 = $60,500 x 0.1 = $6,050. Subtracting this reduced limit from the maximum contribution limit gives: $5,500 - $6,050 = -$550. Since this amount is negative, Carl cannot contribute the maximum amount to a Roth IRA. Instead, he can contribute $4,033 which is the maximum reduced amount.

Carl, Age 44, Wants to Contribute the Maximum Allowed to a Roth