One of the best retirement planning strategies available to you is the Roth IRA, which allows you to invest and grow your money tax-free, meaning that you’ll have more money in your pocket now. It will also continue to grow over time without taxes inhibiting it. However, there are limits on how much you can contribute each year.
Depending on economic conditions or other factors, these rules can change from year to year. With a roth IRA calculator, we can explore how much you can contribute and how these numbers could potentially change in the future.
Many retirement accounts have contribution limits, such as IRAs and 401(k)s. The amount you’re allowed to contribute each year varies based on factors like age and income. For example, you can contribute up to $5,500 per year (the limit slightly raises each year). If you’re 50 or older, your employer may allow you to make an additional $1,000 catch-up contribution per year.
The annual maximum you can contribute to your Roth IRA is $6,000 per year ($7,000 if you are age 50 or older), or your taxable income minus your deduction, whichever is lower. If you’re covered by an employer retirement plan like a 401(k) or 403(b), it will reduce your maximum contribution accordingly.
If you earn $75,000 per year, your maximum contribution would be $4,999 ($6,000 – $750) — or 100% of your eligible income. If you have no retirement plan through work and make more than $120,000 per year, then your contribution limit is reduced to zero.
To contribute to a Roth IRA, you must earn income and meet certain qualifications. If you are single and your modified adjusted gross income is less than $135,000 in 2022, you can contribute up to $5,500. Between $135,000-$203,000 in 2022,you can make partial contributions. If your MAGI is $203,000 or more, you are not eligible to contribute to a Roth IRA.
According to the experts at SoFi, beginning with 2022 tax-year contributions, you can make regular contributions to a Roth IRA until April 15 of your tax year, in which you turn 701⁄2. The clock doesn’t stop there, though. All is not lost if you already have an account and want to keep contributing after age 701⁄2. You can continue making regular contributions through April 15 of that same year (and any subsequent years). When taking withdrawals from your account, however, things get more complicated.
However, contributions are still allowed after you turn 701⁄2. What you can’t do is make any more regular contributions. To continue making non-regular contributions, you must show that your modified adjusted gross income (MAGI) is below $122,000 if filing single or $193,000 if married filing jointly.
Withdrawals from your account are taxed as ordinary income, just like regular IRAs. With traditional IRAs, you can take withdrawals of your contributions—the money you invested—at any time without paying taxes or penalties. But with Roth IRAs, that’s not always true: It depends on when you made your initial contribution and how old you are now.
In conclusion, there is no limit on how much an individual can contribute to a Roth IRA. The only limit is income