Maxing out your Roth IRA (individual retirement account) every year can set you up for more tax-free income during retirement. For example, if you end up with a million-dollar Roth IRA, you'll be able to withdraw every penny in the account 100% tax-free after you've checked the box on the requirements.
If you're just getting started on your Roth IRA journey or want to take your goals up a notch in 2024, here are a few moves you can make to maximize your account without breaking a sweat.
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1. Contribute as much as possible
The Roth IRA is one of the most powerful accounts on the retirement scene, but there are limits to how much you can stash away in the account every year. For 2024, you can set aside up to $7,000 in a Roth IRA if you're 49 and under. After you turn 50, you can chip in an extra $1,000 catch-up contribution, which brings your total contribution limit to $8,000.
Keep in mind that your 2024 Roth IRA contribution can't exceed your earned income for the year. If your income is too high, you won't be able to make any direct contributions to a Roth IRA. So check the 2024 Roth IRA income limits to see if your maximum contribution will be reduced or completely eliminated before directing money into the account.
2. Set up a plan to crush your Roth IRA goals
You have until April 15, 2025 (or the tax filing deadline) to contribute to a Roth IRA for 2024. That's more-than-enough time to max out your account if you start early, create a game plan, and make strategic moves during the year. Here are a few ways to max out your Roth IRA in 2024:
- Create a 12-month Roth IRA contribution plan. If you want to check your 2024 Roth IRA goals off your list before the ball drops on Dec. 31, 2024, you can contribute roughly $584 to your account every month. If you're 50 and older, you can contribute around $667 every month to take advantage of the catch-up contribution. You can also increase your monthly contribution if you want to achieve your goal sooner.
- Increase your contributions every month or quarter. If you need to work on your finances before you contribute hundreds of dollars to a Roth IRA every month, you can set aside smaller amounts in the beginning. Maybe you can start with $25 per week for the first couple of months and then gradually work your way up to larger contribution amounts after you've increased your income, decreased your expenses, or conquered other financial goals.
- Put your work bonus to work. If you receive a work bonus or unexpected cash during the year, you can put that money to work in a Roth IRA. Also, consider adding money from a side gig to a Roth IRA as long as it doesn't push your income over the 2024 Roth IRA income threshold.
Determine your contribution plan as soon as possible so that you can automate your success. This is a good time to schedule recurring transfers from a checking account to a Roth IRA on a monthly or weekly basis. This will guarantee that you hit your Roth IRA contribution goal by your target date.
3. Make sure your finances are in order
It's hard to max out your Roth IRA when you have other financial obligations weighing you down. Before you dive into your Roth IRA game plan, ask yourself the following questions:
- Are you able to manage your monthly bills?
- Do you have an emergency fund?
- Do you have a plan to tackle credit card debt?
By assessing your current financial situation, you can get a better idea of roadblocks that may try to get in the way of your Roth IRA goals. For example, if you don't have an emergency fund, you may be tempted to tap into your Roth IRA funds when an unexpected expense pops up. To avoid this, you might want to increase your income or decrease your expenses at the beginning of the year so you can have more money to allocate toward your emergency fund and retirement goals.
Planning ahead is the key to crushing your Roth IRA goals in 2024. The sooner you can eliminate distractions, the faster you can achieve your goals. By getting started now, you'll be able to slam-dunk your Roth IRA goals and make your biggest Roth IRA contribution yet.
