Get Jazzed: 2024 Roth IRA Contribution Limits Have Increased

Editor's note: An update has been made the article. Initially the article said that as long as your individual income is under $146,000, you can contribute to a Roth IRA in 2024. That number has been updated to $161,000 to reflect the sliding scale contribution maximum.

It's a good time to start working on your retirement contribution goals for 2024. The Internal Revenue Service just announced the contribution limits for retirement accounts, including Roth IRAs.

The Roth IRA (individual retirement account) has been around for more than two decades, and it's picking up more steam for its attractive tax benefits. If you think you'll meet the qualifications to contribute to a Roth IRA, you should check out the new limits and put together your game plan now.

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Higher Roth IRA limits for 2024

Every fall, the IRS announces inflation-adjusted retirement contribution amounts. In 2023, we saw the first increase for Roth IRA contribution limits since 2019. Now, the limits are rising again in 2024.

You can contribute up to $7,000 in a Roth IRA for 2024. That's up from $6,500 in 2023. But if you are 50 and over, the contribution cap jumps to $8,000.

If you haven't contributed to your Roth IRA for 2023, there's still time. At this point in the year, you're in a good position to still max out your 2023 Roth IRA while planning ahead for the new year. You have until April 15, 2024 to fund your 2023 Roth IRA.

Data source: IRS.

Make sure you qualify

Not everyone can contribute the maximum amount to a Roth IRA.

Let's say you contribute money to a Roth IRA on behalf of your 12-year-old son. For 2023, your child earned $8,000 from part-time work. You're able to contribute the maximum amount ($6,500) to your child's Roth IRA.

But let's say your child's income drops to $3,000 in 2024. In that case, your Roth IRA contribution to your child's account would be limited to his taxable compensation for the year. No one is allowed to contribute more to a Roth IRA account than they have earned for the year.

You also have to be careful if you enter six-figure territory. As soon as your income exceeds the threshold, you'll be barred from making direct contributions to a Roth IRA in 2024.

For example, if your tax filing status is single for 2024, you won't be able to contribute the maximum amount to a Roth IRA if your income is over $146,000. But you can still make reduced contributions until your income hits $161,000. That window is called the phaseout range. As long as your income is under $161,000, you qualify to make direct contributions to a Roth IRA.

Take a look at the Roth IRA phaseout ranges if you're filing single, as a head of household, or married filing jointly in 2024.

Data source: IRS.

Top Roth IRA benefits you don't want to miss

Before you contribute money to a Roth IRA, it's important to make sure you check the box on the requirements. Then, you want to evaluate the pros and cons of contributing to the account. Here are a few benefits to help make your decision a bit easier:

• Tax-free gains and dividends during retirement.
• No required minimum distributions.
• Ability to withdraw original contributions at any time without paying income tax or early withdrawal penalty.

If these benefits sound good to you, then you might want to open a Roth IRA or add more money to it in 2024. If you think your income will keep going up, you want to take advantage of your ability to easily make contributions to the account now. The more you contribute, the more money you'll have to invest in assets of your choice. And if you're hoping to build a six-figure Roth IRA, you'll need to crush your contribution goals now.