While the tax benefits of a Roth IRA are generous (your money can grow tax-free, and you can withdraw it tax-free after age 59 ½, 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.
#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 withdraw investment earnings later without owing tax as long as you follow IRS rules for qualified withdrawals.
Generally, contributing to a Roth account makes the most sense if you believe the tax rate you'll pay today will be lower than the tax rate you'll pay when withdrawing the money in retirement. If on the other hand you think your tax rate today will be higher than it'll be when you're in retirement, making tax-deferred contributions to a traditional IRA or 401(k) may be a better option. However, consider speaking with a tax advisor about your personal situation to help you decide which account is better for you.
#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. The contribution limits for traditional and Roth IRAs can be adjusted annually by the IRS, but this is generally only done in $500 increments, so in some years, inflation may not be large enough to warrant a change.
For 2024 and 2025, the IRA contribution limits are the same. Each person is limited to a maximum contribution of $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 that year.
#3: You must stay below the 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 ($150,000 for 2025) to contribute the full amount to a Roth IRA. After crossing that income threshold, your maximum contribution declines the more you earn. After your MAGI hits $161,000 for 2024 ($165,000 for 2025), you're no longer eligible to contribute to a Roth IRA.
If you're a married couple filing jointly, you and your spouse can contribute up to the maximum amount to a Roth IRA if your combined MAGI is under $230,000 for 2024 ($236,000 for 2025). After hitting that income level, your contribution limits decrease as your MAGI rises until you hit $240,000 for 2024 ($246,000 for 2025), at which point you can no longer contribute to a Roth IRA.
#4: You can contribute to a Roth IRA, even if you have an employer-sponsored plan like a 401(k), 403(b), or 457
Keep in mind, the Roth IRA income limits listed above still apply. If your employer-sponsored plan offers matching contributions, consider first saving it in that account, at least enough to get the full matching contribution. After that, you may want to consider saving in a Roth IRA, assuming a Roth account makes more sense than the tax deduction offered by a tax-deferred account. However, if you have the ability, saving the maximum in both account types could be the best option—helping you potentially get the most out of your retirement savings.
Which IRA is right for you?
Explore more topics
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.
Investing involves risk including loss of principal.
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.
The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.
Supporting documentation for any claims or statistical information is available upon request.