A Roth IRA provides generous tax breaks for retirement investing, but there are annual Roth IRA contribution limits that are affected by household income. These limits can change from one year to the next, and your age also affects how much you can invest.
For 2022, the Roth IRA contribution limits are the same as they were in 2021: $6,000 for those under the age of 50 and $7,000 for those over the age of 50.
These limits are the maximum each person — or married couple — can contribute. As the table below indicates, once your income reaches a certain level, Roth IRA contribution limits decline until you’re not allowed to contribute anything.
|Roth IRA Contribution Guidelines|
|Tax Filing Status||Modified Adjusted Gross Income (MAGI)||Contribution Limit|
|< $129,000||$6,000 ($7,000 if 50 or older)|
|≥ $129,000 but < $144,000||Partial contribution*|
|≥ $144,000||Not eligible|
|< $204,000||$6,000 ($7,000 if 50 or older)|
|≥ $204,000 but < $214,000||Partial contribution*|
|≥ $214,000||Not eligible|
|< $10,000||Partial contribution*|
|≥ $10,000||Not eligible|
How much would you like to invest?
If your income is below the threshold at which contributions start phasing out, it’s easy to know how much you can contribute. If your income is the range where you’re still allowed to contribute but can’t contribute the full amount, you’ll need to figure out your max Roth IRA contribution. Here’s how the math works out:
If you were married filing jointly and your modified AGI was $210,000, here’s what this calculation would look like:
Your maximum contribution would be $2,400.
Roth IRAs work differently than traditional IRAs or traditional 401(k)s. With these other retirement accounts, you put money in with pre-tax dollars but are taxed when you withdraw money. When you invest in a Roth IRA, you put in after-tax dollars but the money grows tax-free and is withdrawn tax-free.
Roth IRAs also differ from traditional IRAs and 401(k)s in another important way. As Brown explained, Roth IRAs aren’t subject to required minimum distributions (RMD). With traditional IRAs or 401(k)s, you’re required to start taking some money out beginning at age 72. RMDs ensure you withdraw funds so you can be taxed on them.
Roth IRAs aren’t subject to RMDs, which means you can allow the money to keep growing as long as you’d like. You can leave your money to your heirs and they won’t pay taxes on withdrawals either — and can stretch withdrawals out over time.
If you make too much to contribute to a Roth IRA, you have other options.
Brown advised that you can make “backdoor” contributions to a Roth IRA if you’re eligible to contribute to a traditional IRA. Traditional IRAs have no income limits unless you or your spouse are covered by a workplace retirement plan.
You can contribute to a traditional IRA and convert it to a Roth just by submitting some simple paperwork to your plan administrator; however, you must pay taxes on money you’re converting.
This isn’t an issue if you convert in the same year. Let’s say you contribute $6,000 to your IRA, take a $6,000 deduction, then convert the traditional to a Roth IRA. You would pay taxes on the $6,000. However, if you contributed to a traditional IRA in 2021, took a $6,000 deduction and converted the traditional IRA to a Roth in 2021, your taxable income in 2022 would be $6,000 higher. Additionally, if your initial $6,000 contribution had grown to $6,500, you’d be taxed on the full $6,500 you’re converting.
Of course, you also have the option to contribute to a traditional IRA and just leave the money there, but if you or your spouse are covered by a retirement plan at work, the income threshold at which eligibility phases out for traditional IRA contributions is lower than the threshold for a Roth IRA.
The right place to open your account will depend on the following several factors:
Ready to open an account? Browse our list of the best Roth IRA providers.
Keep careful track of contributions to your Roth IRA so you don’t go over the allowable contribution limit. However, if you do find that you contributed too much, you have a few options:
If you fail to be proactive about monitoring your contributions, you’ll end up owing a 6% excise tax on the contributions that exceeded your limit for the year. The excise tax is recorded on IRS Form 5329.
Knowing the max Roth IRA contribution limits is important. When you know how to calculate the amount you can contribute, you can make smart choices about investing for your future.
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