Ira
December 21, 2023
Once you understand what a Roth IRA is, it's time to dig into how contributions work. Learn how specific rules and limitations could affect you and your money.
While the tax benefits of a Roth IRA are generous—your money grows tax-free, and you can withdraw it tax-free after age 59½, once you've had the account for at least five years—there are specific limitations to consider.
Here are four things to keep in mind about Roth IRA contribution limits and rules.
Read the rest of this series:
- What Is a Roth IRA?
- Must-Ask Question: Roth IRA Withdrawals
- Roth 401(k) vs. Roth IRA
- Why Consider a Roth Conversion and How to Do It
- The Backdoor Roth: Is It Right for You?
- What Is a Roth IRA?
- Must-Ask Question: Roth IRA Withdrawals
- Roth 401(k) vs. Roth IRA
- Why Consider a Roth Conversion and How to Do It
- The Backdoor Roth: Is It Right for You?
- What Is a Roth IRA?
- Must-Ask Question: Roth IRA Withdrawals
- Roth 401(k) vs. Roth IRA
- Why Consider a Roth Conversion and How to Do It
- The Backdoor Roth: Is It Right for You?
#1: Roth IRA contributions won't get you an up-front tax deduction
This is because they’re made on an after-tax basis—in other words, with dollars you’ve already paid taxes on. You don’t get an immediate tax break like you might with a traditional IRA, but you can withdraw contributions tax- and penalty-free any time or withdrawinvestment earnings later without owing tax as long as you follow IRS rules for qualified withdrawals.
#2: The maximum annual contribution is the same for Roth IRAs and traditional IRAs
But if you have multiple IRAs (such as a Roth and a traditional IRA), your combined contributions can’t exceed the annual per-person limit. For 2024, total IRA contributions for each person are limited to $7,000 if you’re under age 50, and $8,000 if you’re 50 or older. To count toward the current year maximum, you must schedule your contributions before the annual tax-filing deadline if you want them to count for 2024.
“If you’re new to IRAs, keep in mind that contribution limits are tied to inflation and generally increase over time based on IRS rules,” said Rob Williams, managing director of financial planning, retirement income, and wealth management for the Schwab Center for Financial Research. “Be sure to check the maximum contribution each year.”
#3: You must stay below income limits to contribute to a Roth IRA
If you file taxes as a single person, your modified adjusted gross income (MAGI) must be under $146,000 for 2024 to contribute the full amount. At higher income levels, your maximum contribution declines the more you earn. And if your MAGI is $161,000 or more, you’re no longer eligible to contribute to a Roth IRA.
If you’re a married couple filing jointly, you can contribute up to the maximum amount to each spouse’s IRA if your combined MAGI is under $230,000 for 2024. As with single filers, your contribution limits decrease as your MAGI rises. So, couples who make $240,000 or more combined are not eligible to contribute.
Roth IRA income limits for 2024
Roth IRA income limits for 2024
| Single filers (MAGI) | Married filing jointly (MAGI) | Married filing separately (MAGI) | Maximum contribution for individuals under age 50 | Maximum contribution for individuals age 50 and older |
|---|---|---|---|---|
| under $146,000 | under $230,000 | $0 | $7,000 | $8,000 |
| $147,500 | $231,000 | $1,000 | $6,300 | $7,200 |
| $149,000 | $232,000 | $2,000 | $5,600 | $6,400 |
| $150,500 | $233,000 | $3,000 | $4,900 | $5,600 |
| $152,000 | $234,000 | $4,000 | $4,200 | $4,800 |
| $153,500 | $235,000 | $5,000 | $3,500 | $4,000 |
| $155,000 | $236,000 | $6,000 | $2,800 | $3,200 |
| $156,500 | $237,000 | $7,000 | $2,100 | $2,400 |
| $158,000 | $238,000 | $8,000 | $1,400 | $1,600 |
| $159,500 | $239,000 | $9,000 | $700 | $800 |
| $161,000 & over | $240,000 & over | $10,000 & over | $0 | $0 |
- Disclosures
Source: irs.gov. For illustrative purposes only.
You may contribute simultaneously to a traditional IRA and a Roth IRA (subject to eligibility) as long as the total contributed to all (traditional or Roth) IRAs totals no more than $7,000 ($8,000 if you’re age 50 or older) for the 2024 tax year.
#4: You can contribute to a Roth IRA, even if you have a 401(k), 403(b), or 457 plan at work
Keep in mind, Roth IRA income limits still apply. And if your budget doesn't allow you to contribute to both accounts, it's usually a good idea to max out your employer-sponsored account first.
Once you're contributing at least up to the full employer match there, saving more in a traditional IRA or Roth IRA could be your next best step.
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Retirement Ira
Withdrawals from an IRA prior to age 59½ may be subject to a 10% Federal tax penalty. For a Roth IRA, tax-free withdrawals of earnings are permitted five years after first contribution creating account. Earnings withdrawn prior to that may be subject to ordinary income taxes and a 10% Federal tax penalty.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
This informationdoesnot constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate,Schwabrecommends consultation with a qualified tax advisor, CPA, Financial Planner or Investment Manager.
Supporting documentation for any claims or statistical information is available upon request.
