How do the larger contribution limits impact a person who is only age 20 in the year 2002?
A person will receive the larger standard contribution limits (i.e. $3,000, $4,000 and $5,000) for the first 30 years, and then will receive the 50+ contribution limits for the next 21 years. The chart below shows that $1,098,186 will be accumulated under the EGTRRA contribution limits as compared to $463,712 if the contribution limit had remained at $2,000. This difference of $634,474 is very substantial. Of this amount, $165,000 is due to the increase in the contribution limits and the remainder is due to accumulated earnings. For purposes of preparing this chart, it has been assumed that the Sunset provision will not go into effect and the IRA earns 5% per year.
