If talk about IRAs and employer-sponsored retirement plans, then we must say that all types of those are subject to annual contribution limits set by the federal government. But there are also limits. They are usually adjusted to compensate for inflation and the growth in the cost of living.
IRAs
You can contribute up to $4,000 to all IRAs combined for the 2008 tax year. In this case the annual limit increases to $5,000 in 2008 and is adjusted for inflation in later years. Let's take an example. Imagine you have a traditional IRA and a Roth IRA.
In this case you can only contribute a total of the annual limit in one year, not the annual limit to each. And then being at the age of 50 or older, you can also make an annual $1,000 "catch-up" contribution.
Employer-Sponsored Retirement Plans
Such employer-sponsored retirement plans as 401(k)s and 403(b)s, have a 2007 contribution limit of $15,500. And individuals aged 50 and older can contribute an extra $5,000 as a catch-up contribution.
It is sensible to check the contribution limit each year in order to put aside as much as possible. This is especially if you are currently contributing to an IRA or an employer-sponsored retirement plan.
Distributions from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income and may be subject to an additional 10% federal income tax penalty if taken prior to reaching age 59½. Your IRA contributions may or may not be tax deductible, depending on your adjusted gross income if you participate in both a traditional IRA and an employer-sponsored plan.
| 
