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How Much Can I Contribute to My IRA?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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An IRA, or individual retirement account, is a tax-advantaged investment account designed to help you save for retirement. It’s a great way to beef up your nest egg, whether you’re working for a company that doesn’t offer a 401(k) or you’re just looking for more ways to save. In the case of a traditional IRA — the focus of this article — you’ll also get a nice tax break on your contributions.

However, you can’t contribute an unlimited amount of money to your IRA. Like other types of retirement accounts, traditional IRAs are governed by contribution limits set by the IRS. For 2019, that limit is $6,000 per year (or $7,000 for those age 50 or older, who get an extra $1,000 in catch-up contributions).

Depending on your circumstances, your contributions may not be eligible for full tax-deductible status. And your individual contribution limit may be lower than the standard $6,000 if you earn a high income or have a retirement account through your employer.

If you’re asking yourself “How much can I contribute to my IRA?” keep reading to learn all about the ins and outs of traditional IRA contributions.

Tax benefits of a traditional IRA

So how does a traditional IRA offer tax benefits in the first place?

For the majority of earners, money contributed to a traditional IRA doesn’t count toward annual income, meaning you don’t have to pay income taxes on it. However, this tax break does come with a trade-off: When it comes time to take distributions or withdrawals from your traditional IRA, you’ll have to pay taxes on the full amount, including growth earnings. This differs from a Roth IRA, in which your contributions are taxable today but grow tax-deferred and can be withdrawn tax-free later.

Whether a Roth or traditional IRA is right for you depends on a variety of factors, including what you expect your income tax bracket to be when you retire. For more information on how to decide between the two, check out this guide to choosing the right IRA.

Where to open an IRA

If you do decide to open an IRA — whether Roth or traditional — you’ll have lots of provider options to choose from. These common retirement vehicles are available through a variety of financial firms, including nationwide banks like Chase, brokerages like TD Ameritrade and even some mobile investing apps like Stash.

However, different companies will charge different fees to open and maintain an IRA — and those are on top of any fees associated with trades and commissions. You also may be required to make a minimum initial deposit, which may be out of reach if you don’t have much to put toward investments right now.

Deciding which IRA provider is right for you depends on how much guidance you want and how much you’re willing to pay for it.

Tax-deductible phase-out limits for traditional IRA contributions in 2019

Although anyone under the age of 70 and a half can contribute to a traditional IRA — as long as they’ve earned taxable income in the year they wish to make the contribution — they may or may not receive the full tax benefit. For example, if you earn more than a certain income threshold or are covered by an employer-sponsored retirement plan, your contribution limit and tax deduction eligibility may be lowered.

2019 Tax-Deductible Phase-Out Limits for Traditional IRA Contributions

Filing Status

Tax Deduction Eligibility

Single or head of household covered by a work retirement account
  • Full deduction up to the contribution limit if you earn $64,000 or less

  • Partial deduction if you earn between $64,000 and $74,000

  • No deduction if you earn $74,000 or more

Single or head of household not covered by a work retirement account
  • Full deduction up to the contribution limit, no matter how much you earn


Married filing jointly or qualified widowers covered by a work retirement account
  • Full deduction up to the contribution limit if you earn $103,000 or less

  • Partial deduction if you earn between $103,000 and $123,000

  • No deduction if you earn $123,000 or more

Married filing jointly or separately with a spouse who is not covered by a work retirement account
  • Full deduction up to the contribution limit, no matter how much you earn

Married filing jointly with a spouse who is covered by a work retirement account
  • Full deduction up to the contribution limit if you earn $193,000 or less

  • Partial deduction if you earn between $193,000 and $203,000

  • No deduction if you earn $203,000 or more


Married but filing separately, whether or not one spouse is covered by a work retirement account
  • Partial deduction if you earn less than $10,000

  • No deduction if you earn $10,000 or more


How to calculate your phase-out contribution amount

Even if your circumstances make you ineligible to deduct the full amount of your IRA contribution, you can put some money in the account, just not the $6,000 maximum. You can calculate your phase-out contribution amount — or the total tax-deductible amount you’re eligible to contribute to your IRA — by using an IRA contribution calculator.

What if you make too much to contribute to an IRA?

If you earn too much money to qualify for a traditional, tax-deductible IRA, there are plenty of retirement vehicles available to choose from, which may include:

  • A 401(k) or 403(b). These are employer-sponsored accounts that carry an overall contribution maximum of $56,000 or 100% of employee compensation, whichever is lower, for 2019.
  • A SEP IRA. An employer can contribute the lesser of $56,000 or 25% of employee compensation for 2019. The same limits apply to contributions if you are self-employed, but certain rules apply regarding the maximum deductible contribution.
  • A Roth IRA. This account carries the same contribution limits as a traditional IRA ($6,000 for 2019), but you’ll pay income taxes ahead of time, so you won’t run into this particular tax problem.

Unfortunately, not everybody can open and contribute directly to a Roth IRA. Your eligibility for this type of account is based on your income. If you make more than the designated income threshold, however, you can pursue a “backdoor Roth,” where you transfer assets from a traditional IRA to a Roth in order to reap its unique suite of benefits.

What happens if you contribute too much to your IRA?

IRAs have relatively low contribution limits, which means overcontributing is an easy mistake to make, especially if you’re contributing to multiple IRAs at the same time.

Although saving too much for retirement might not sound like a problem, the IRS has regulations and penalties that make going over the limit unattractive. Any excess contributions made to your traditional IRA will be subject to a 6% tax (on top of what you’ll pay when you eventually withdraw the money) not just for the year you went over the limit but for every year the excess money remains in the account.

Fortunately, if you recognize the error quickly enough, you can withdraw the excess money without paying a penalty — as long as you do so before you file your tax return. If you’re too late, it may be possible to file for an extension on your return or apply the contributions to the following tax year. However, if you do so, you’ll need to ensure you adjust next year’s contribution total so you don’t run into the same problem again.

Bottom line: how much can you contribute to a traditional IRA?

The maximum contribution limit for a traditional IRA is $6,000 for 2019 (or $7,000 if you’re age 50 or older). However, specific financial circumstances, such as having retirement coverage through an employer or earning above a certain income threshold, could lower your deductible limit.

If you overcontribute to an IRA, you’ll be subject to a recurrent 6% tax on the excess amount, but you can avoid that penalty if you withdraw the funds before filing your return or by applying them to the following taxable year (and adjusting that year’s contributions accordingly).

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Cattanach
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Jamie Cattanach is a writer at MagnifyMoney. You can email Jamie here

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Investing

Ally Invest Managed Portfolios Review 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Ally Invest Managed Portfolios is a robo-advisor option from a trusted online-only financial institution.

It can make managing your money simple: Just answer a few basic questions about your goals and risk tolerance and your funds are invested for you. However, while fees are competitive, they aren’t the lowest among other robo-advisors’ offerings.

If you don’t mind the lack of bonus for opening the account, and you want to take a hands-off approach to building wealth, Ally Invest may be a good option.

Ally Invest Managed Portfolios
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The Bottom Line: Ally Invest Managed Portfolios is a decent robo-advisor that’s competitive with other managed portfolios online. But its lack of tax-loss harvesting, and fees that slightly exceed competitors may prompt you to look elsewhere if you’re not already an Ally customer.

  • The minimum deposit to invest in Ally Invest Managed Portfolios is $100
  • The management fee is 0.30%, no matter how high your account balance
  • Customer service is available 24/7, but there are no local branches to visit

Who should consider Ally Invest Managed Portfolios?

If you’re looking for a robo-advisor that allows you to build a diversified portfolio without a lot of advanced knowledge about investing, Ally Invest Managed Portfolios has you covered.

You’ll answer a few questions about your age; timeline for investing and risk tolerance; and whether you’re investing for retirement, wealth-building or a big purchase. Then, Ally Invest comes back with a recommended portfolio you can accept or tweak.

You can open a joint, custodial or Individual taxable account with Ally Invest Managed Portfolios, or can opt for a Traditional IRA, Roth IRA or Rollover IRA. Unfortunately, unlike with Ally Invest’s self-directed accounts, there’s no promotion or bonus for transferring funds into a managed portfolio. And, you’ll need quite a bit of money to get started — more than many competitors in the robo-advisor industry require.

Still, if you don’t mind the lack of brick-and-mortar locations and marginally higher fees, Ally Invest is a worthy competitor to consider when looking for help managing your money.

Ally Invest Managed Portfolios fees and features

Amount minimum to open account
  • $100
Management fees
  • 0.30%
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $50 full account transfer fee
  • $50 partial account transfer fee
  • $0 inactivity fee
Current promotions

Ally Invest offers a $50 cash bonus plus free trades if you deposit or transfer at least $10,000. Bonuses go up from there and increase up to a cash bonus of as much as $3,500 if you deposit or transfer at least $2 million in assets.

Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Coverdell Education Savings Account (ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • SEP IRA
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
Portfolio
  • Ally managed portfolios cover 3 asset classes and 9 major market segments
Automatic rebalancing
Tax loss harvesting
Offers fractional shares
Ease of use
Mobile appiOS, Android, Windows Phone
Customer supportPhone, 24/7 live support, Chat, Email

Strengths of Ally Invest Managed Portfolios

Ally Invest Managed Portfolios has some significant advantages worth considering:

  • Investing in a diversified portfolio is easy. You’ll answer basic questions about your investment goals and Ally Invest will suggest a portfolio with an appropriate mix of U.S. and foreign bonds, international and U.S. stocks, and cash. You can also tweak the suggestions Ally Invest Managed Portfolios makes, so you take on more or less risk based on your comfort level.
  • Ally requires a low minimum deposit of just $100 to open a managed portfolio account. While some of Ally’s competitors (such as Betterment) don’t have a minimum deposit requirement at all, $100 still falls on the very low side of the scale and makes this account extremely accessible to new investors.
  • Ally Invest Managed Portfolios offers automatic portfolio rebalancing. This helps to ensure you remain invested in the right mix of assets if certain investments under- or over-perform.
  • Customer service. Ally Invest offers phone, Email, and chat support. Customer service agents are available 24/7 with little or no wait. Agents will do their best to provide answers, although it may take a little time if your questions are technical since you may need to be transferred to an investment advisor.

Drawbacks of Ally Invest Managed Portfolios

You’ll also want to consider the potential downsides of choosing Ally Invest Managed Portfolios.

  • Ally Invest Managed Portfolios charges fees that are slightly higher than several competitors. You’ll pay .30% for Ally’s robo-advisor service, compared with .25% for Betterment’s digital account or for Wealthfront.
  • Ally Invest Managed Portfolios currently does not offer tax loss harvesting, which involves selling investments at a loss to offset taxable gains (although they do offer tax advantaged portfolios which add municipal bonds to Ally’s core portfolios). Competitors such as Betterment do offer this feature. However, Ally representatives indicate tax loss harvesting is expected to be rolled out in 2019 and investors with managed portfolios will be able to transition their accounts into a portfolio with tax loss harvesting.
  • No physical branches. If you’d prefer to go into a branch for local customer support, you’ll need to look elsewhere, such as E-Trade, which has more than 30 branches across the country.
  • Mobile apps aren’t very advanced. While Ally Invest allows you to use mobile apps on iPhone and Android phones to access basic account information, the offered apps aren’t as feature-rich as competitors such as Betterment.

Is Ally Invest Managed Portfolios safe?

Whenever you invest your money, there’s a risk you may lose some or all of it. This is no different with Ally Invest Managed Portfolios. The assets your robo-advisor invests you in could decline in value and your portfolio could lose money.

But Ally Invest is as safe as any trusted online brokerage, and there’s little risk of losing assets if the investment firm goes bankrupt. Ally Invest is in compliance with regulatory requirements according to FINRA’s Broker Check tool. Ally Invest is also a member of the FDIC and SIPC, both of which ensure cash in bank and brokerage accounts respectively.

Final thoughts

Ally Invest Managed Portfolios is a viable choice for investors looking for an easy, hands-off way to invest — especially with its low $100 minimum deposit requirement. Ally also promises to offer a broad range of socially-responsible portfolios, which should interest investors who want to consider more than just financial returns. But the lack of a promotional offer, higher management fees, and the fact tax loss harvesting isn’t currently offered makes Ally a less-than-ideal option for investors looking for the most affordable way to build a diversified portfolio. If you want a lower-cost option that does offer tax-loss harvesting, consider robo-advisors such as Betterment or Wealthfront.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Christy Rakoczy
Christy Rakoczy |

Christy Rakoczy is a writer at MagnifyMoney. You can email Christy here

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Investing

SogoTrade Review 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

SogoTrade is a relatively new face in the world of discount brokers, having joined the fray in 2010. While less well-known than some of its larger peers, SogoTrade quickly set itself up as a low-cost player that could offer high-volume traders prices that undercut those larger competitors. And even low-volume investors have a way to get those low commissions without significant amounts of trading. SogoTrade is a solid choice for frequent or high-volume traders, such as penny stock traders.

SogoTrade
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The bottom line: SogoTrade offers a low-frills experience at a competitive price.

  • Volume-based pricing that can lower trading costs substantially
  • Discounts on commissions for prepaid trades
  • Limited education and research offerings

Who should consider SogoTrade

SogoTrade really pitches itself to high-volume traders who need a low-cost way to get in and out of the market. If you’re in this demographic, SogoTrade may be for you. The ability to trade up to 100,000 shares for one low flat rate (not including stocks below $1 a share, which have an additional per-share fee) also may lure penny stock traders. Investors who aren’t in these two categories will find SogoTrade a harder sell.

SogoTrade is not especially well-suited to beginners, with limited education and research components, though it does have some of each. Those investors who don’t need those features may still find the broker an apt choice, however, especially if they’re willing to take advantage of SogoTrade’s discounts for prepaid trades.

SogoTrade fees and features

Current promotions

100 free trades in the first 30 days

Stock trading fees
  • $4.88 per trade (fewer than 150 trades per quarter)
  • $2.88 per trade (150 or more trades per quarter)
Option trading fees
  • $4.88 / trade + $0.50 / contract (fewer than 150 trades per quarter)
  • $2.88 / trade + $0.50 / contract (150 or more trades per quarter)
Amount minimum to open account
  • $0
Margin rate range6.25% - 11.00%
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Options
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $75 full account transfer fee
  • $75 partial account transfer fee
  • $50 annual inactivity fee if account drops below $100 and has not made at least one trade
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • SEP IRA
  • Trust
Commission-free ETFs offered
Mutual funds (no transaction fee) offered
Mobile appiOS, Android
Customer supportPhone, Chat, Email
Research resources
  • SEC filings
  • Mutual fund reports
  • Earnings press releases

Strengths of SogoTrade

  • Volume-based pricing: SogoTrade has a multitiered system for charging commissions — one that’s highly advantageous for frequent traders and even penny stock traders who transact thousands (or even tens of thousands of shares) at a time. SogoTrade’s basic commission is $4.88 per trade — and with Charles Schwab and Fidelity both at $4.95, that’s not substantially different. But if you’re making more than 150 trades per quarter, SogoTrade slashes the fee to just $2.88 per trade (150 or more trades per quarter) . That’s great for high-volume traders. And for penny stock traders? SogoTrade’s commission allows you to trade up to 100,000 shares for the same flat rate, though you’ll have to pay a supplement for stocks trading below $1 per share. That supplemental fee comes to $0.0003 per share (10% of principal max) or 0.25% of principal.
  • Discounts for prepaid trades: Even if you’re not a frequent trader, you can reduce your commission to $3.88 or $2.88 per trade by buying prepaid packs of trades at that rate. SogoTrade allows you to buy 20 trades for $3.88 per trade or 50 trades for $2.88 per trade, and they cover stock trades and the base commission for options. So that could be an attractive (albeit unconventional) option for realizing low-cost trades without trading a lot. However, the prepaid trades are valid for only a year after purchase, so it’s a “use ‘em or lose ‘em” scenario.
  • Low options commissions: Given its rabid focus on low costs, it’s not surprising that SogoTrade also has low commissions on options. Pricing ranges from $2.88 to $4.88, depending on volume or whether you buy prepaid trades. Then options trades tack on a $0.50 per-contract fee, which is toward the lower end of the range. For example, Fidelity and Schwab charge their base rate plus $0.65 per contract. Even the low-cost Interactive Brokers typically charges $0.70 per contract, though with no base commission and volume pricing for very large orders. Always nice for traders executing more complicated options orders, SogoTrade charges only one base rate for multilegged options orders. So those complex three- and four-leg trades won’t ring up any extra base fees.

Drawbacks of SogoTrade

  • Limited education and research: For beginners, the lack of substantial educational support at SogoTrade may be a deal breaker. While there are some resources on the site, the entire education section feels more like an afterthought than a valuable addition to the SogoTrade experience. For example, the site’s educational links refer to articles on a third-party site. Similarly, while the broker offers a research center on its site, it feels too basic — even if it does offer some key functionality, such as identifying stocks at 52-week highs and lows and linking to a company’s press releases and SEC filings. The broker does point you in the direction of a free third-party monthly newsletter and stock reports. These resources may be a place to begin for newer investors, but more experienced traders will already have their own preferred resources lined up, so this likely won’t be much of a drawback for them.
  • Cheap but maybe not cheap enough: There’s no question that SogoTrade is targeting customers who are looking to minimize commissions. But the broker looks somewhat caught in the middle here. For the same base commission, rivals like Schwab provide a better educational and research component. Meanwhile, at the other end, cut-rate brokers can offer lower commissions, with Just2Trade providing $2.50 trades without customers having to pony up for prepaid trades (and no expiration dates on trades either).

Is SogoTrade safe?

SogoTrade is a relatively new player in the discount brokerage space, having debuted in 2010, but that doesn’t mean it’s not covered by the same protections as larger and more well-established brokers. Investors’ accounts are covered by the Securities Investor Protection Corporation (SIPC), which protects their value up to $500,000, including a cash limit of $250,000 in the event that the brokerage ceases to operate.

In addition, the broker’s clearing firm, Apex, has coverage up to an aggregate $150 million, with a maximum of $37.5 million for any single account, including a cash-only maximum of $900,000. Of course, these coverages do not protect against declines in the value of the securities in the portfolio.

Final thoughts

Cheap trades really are the priority at SogoTrade, and it shows throughout the website. If you’re a high-volume trader and can meet SogoTrade’s quarterly trade threshold, you may find a home here with the broker’s $2.88 fees. Even lower-volume traders who don’t mind the clunkiness of prepaying for trades may find SogoTrade interesting.

Still, SogoTrade seems caught in the middle of the market, especially for newer investors and many low-volume traders. Its service doesn’t offer enough education and research, relative to Schwab and Fidelity, for its base commission, and it’s not as cheap as other discount rivals such as Just2Trade and eOption (especially for options trades), brokers that are just as cutthroat about costs.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James F. Royal, Ph.D.
James F. Royal, Ph.D. |

James F. Royal, Ph.D. is a writer at MagnifyMoney. You can email James here

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