For the second year in a row, the Roth IRA (individual retirement account) contribution limits are going up. If you've been slacking on your retirement goals in the past, you have a good opportunity to redeem yourself in 2024. Whether your goal is to contribute more than you contributed last year or max out your account, here are a few pointers to help you think about your contribution goals.
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Start with your retirement vision
Contributing thousands of dollars to a Roth IRA might not be at the top of your priority list for 2024. But you may have a change of heart after you think about your future goals and how much it may cost you.
If you have no idea where to start, answer these questions to get a better idea of what retirement will look like for you and the steps you need to take to make your vision a reality:
- When do you want to retire?
- Where do you want to live and what activities do you want to engage in every day?
- How much money have you saved for retirement so far?
- What sources of income do you expect to have during retirement?
If you're nearing retirement and haven't saved much yet, you might want to kick your savings plan up a notch in 2024. That could mean contributing as much as the law allows so that you don't fall too far behind.
Check out the 2024 Roth IRA contribution limits
The Roth IRA contribution limits increased in 2023 and are moving up again in 2024. If you're 49 and under, you can contribute up to $7,000 to a Roth IRA in 2024. That's up from $6,500 in 2023. You can chip in an additional $1,000 if you are 50 or older, bringing your total contribution limit to $8,000.
You're not required to contribute the maximum amount to a Roth IRA. But the more money you contribute, the more funds you'll have to invest in your favorite assets and build your nest egg.
Keep in mind that your annual contribution to a Roth IRA can't exceed your earned income. Let's say you're 73 years old and earned $6,000 from a part-time job. Your maximum Roth IRA contribution would be capped at $6,000, which is your earned income for the year.
You also want to make sure your income doesn't exceed the limits to make direct contributions to a Roth IRA in 2024. For example, if you're married filing jointly, you can contribute the maximum amount to a Roth IRA if your modified adjusted gross income (MAGI) is under $230,000. After that, your maximum contribution limit is reduced until your income jumps over $240,000. At that point, you're not allowed to make direct contributions to a Roth IRA.
|
2024 Tax-Filing Status |
Income Limit for a Full Roth IRA Contribution |
Roth Contribution Phases Out Entirely for Income Above |
|---|---|---|
|
Single and head of household |
$146,000 |
$161,000 |
|
Married filing jointly |
$230,000 |
$240,000 |
Data source: IRS. Table by author.
Develop your 2024 contribution plan
Now is a good time to review your current financial situation and determine how much you should contribute. You can start making contributions to your Roth IRA on Jan. 1, 2024 and have until April 15, 2025 (or the tax filing deadline) to fund the account for 2024.
If you've funded your emergency account and are already taking advantage of your employer match for your workplace retirement plan, you might want to take your Roth IRA goals to the next level. If you're under 50, this could mean contributing $7,000 to your Roth IRA for the year.
You can set up recurring transfers from your account every week or month to make it easier to achieve your 2024 goals. If you end up with a bonus during the year, you can stash those extra funds in a Roth IRA to reach your goal faster.
But if you still don't have a target contribution number in mind, it's important to think about your future self. Contributing more money to your Roth IRA can potentially give you access to more tax-free income during retirement. And the more income you rack up, the easier it will be to fund the retirement you've always dreamed of.
