As you prepare for your retirement, understanding your Roth IRA contribution limits is critical to maximizing your tax savings and benefits potential. It's also important to be able to prepare in advance.

Instead of scrambling around at tax time every year desperately looking for money, you can be prepared and save for your IRA contributions throughout the tax year.

That's why it's critical to keep track of Roth IRA contribution limits and other pension saving restrictions on an ongoing basis as part of your overall estate planning. That way you can plan ahead and make sure you have the funds on hand to maximize your savings and tax breaks. But, how do you do that, and what are those limitations? Keep reading to find out.

Limits on 401(k) Contributions

In 2006, the U.S. government passed a law that made temporarily high contribution limits (previously set to expire in 2011) a permanent fixture. Today, the annual contribution limit for 401K sits at $15,500 with a $5000 catch-up restriction for those over the age of 50.

Limits on Roth IRA Contributions

Roth IRA contributions sit at a low limit of $5000 for those under the age of 50. That equals out to almost $417 each month. But, if you're 50 and older, you can defer $6000 to your IRA. Those limits are set to increase annually in $500 increments, based on current inflation rates.

If you participate in a work-based retirement savings plan and want to move your deductions over to a Roth IRA, there are new limitations in place that could affect that decision.

For example, if your MAGI (Modified Adjusted Gross Income) is between $150,000 and $160,000 for a married couple (between $95,000 and $110,000 for a single individual or household head), your ability to deduct those contributions will be phased out.

SIMPLE IRAs

SIMPLE IRAs are funded both by voluntary salary deductions and employer contributions. Employees, if eligible, can contribute up to 100% of their yearly salary or $11,000, whichever of the two amounts is less. If you're 51 or over, you can make additional annual contributions of up to $2500 - bringing your annual limit to $13,500.

Limitations on Roth IRA Catch Plans

Anyone who is over the age of 50 and currently participating in a Roth IRA, traditional IRA, 403b plan or 401k plan, is allowed to make catch-up payments or contributions up to $5000 per calendar year, with that number increasing each year for inflation.

Before you sit down to work out your retirement savings plan, make sure you understand your Roth IRA contribution restrictions and other caps in place on 401(k) contributions and traditional IRAs.