Please note: This article may contain outdated information about RMDs and retirement accounts due to the SECURE Act 2.0, a law governing retirement savings (e.g., the age at which individuals must begin taking required minimum distributions (RMDs) from their retirement account will change from 72 to 73 beginning January 1, 2023). For more information about the SECURE Act 2.0, please read this article or speak with your financial consultant. (1222-2NLK)
While the tax benefits of a Roth IRA are generous—your money grows 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.
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#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 or investment earnings later without owing tax, as long as you follow IRS rules for qualified withdrawals from a Roth IRA.
#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 2022, total IRA contributions for each person are limited to $6,000 if you're under age 50, and $7,000 if you're 50 or older. To count towards the current year maximum, you must schedule your contributions before the annual tax filing deadline—for example, by April 15, 2023, if you want them to count for 2022.
"If you're new to IRA accounts, keep in mind that contribution limits are tied to inflation and generally increase over time based on IRS laws," says 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 meet 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 $129,000 for 2022 to contribute the full amount. At higher income levels, your maximum contribution declines the more you earn. And if your MAGI is $144,000 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 $204,000 for 2022. As with single filers, your contribution limits decrease as your MAGI rises. So couples who make $214,000 or more combined are not eligible to contribute.
Roth IRA income limits for 2022
| 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 $129,000 | under $204,000 | $0 | $6,000 | $7,000 |
| $130,500 | $205,000 | $1,000 | $5,400 | $6,300 |
| $132,000 | $206,000 | $2,000 | $4,800 | $5,600 |
| $133,500 | $207,000 | $3,000 | $4,200 | $4,900 |
| $135,000 | $208,000 | $4,000 | $3,600 | $4,200 |
| $136,500 | $209,000 | $5,000 | $3,000 | $3,500 |
| $138,000 | $210,000 | $6,000 | $2,400 | $2,800 |
| $139,500 | $211,000 | $7,000 | $1,800 | $2,100 |
| $141,000 | $212,000 | $8,000 | $1,200 | $1,400 |
| $142,500 | $213,000 | $9,000 | $600 | $700 |
| $144,000 & over | $214,000 & over | $10,000 & over | 0$ | $0 |
#4: You can usually contribute to a Roth IRA, even if you have a 401(k), 403(b), or 457 plan at work
Keep in mind that 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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Roth IRA earnings can be withdrawn tax-free after age 59½, if you’ve held the account for at least five years. If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to 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 their 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.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, you should consult with a qualified tax advisor, CPA, financial planner, or investment manager.
The Schwab Center for Financial Research is a division of Charles Schwab & Company, Inc.
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