Understanding Roth IRA Contribution Limits

March 30, 2022

The Roth Individual Retirement Arrangement (IRA), introduced as part of the Taxpayer Relief Act of 1997, has become a popular alternative to the traditional IRA created 23 years prior. The principal difference is that Roth IRA contributions are made with after-tax dollars, so subsequent Roth withdrawals are generally not taxed. However, like traditional IRAs, Roth IRAs have strict maximum annual contribution limits. Here’s what you need to know.


Roth IRA Contribution Limits for 2022

Although you pay into a Roth IRA from taxed income, you can’t contribute unlimited amounts. As of 2022, the maximum you can contribute to a Roth IRA annually is $6,000, or $7,000 if you are over 50.1 If you have both a traditional and a Roth IRA with one or more banking institutions, the maximum amounts represent the combined amount you can contribute annually across all your Roth and traditional accounts. In other words, if you’re under 50, you can’t double up and contribute $6,000 to each IRA account. It’s up to you to decide how to split your contributions across all your IRA accounts within that limit. You could, for example, put $3,000 into each account, or you could opt to contribute more to one account than the other to reach a combined total of $6,000 (or $7,000 if you are over 50).


You also can’t contribute more than you earn. For example, if your total taxable income for the year is less than the Roth IRA contribution limit for your age, your income effectively becomes your Roth IRA contribution limit.


Roth IRAs Also Have Strict Income Limits

Unlike those of traditional IRAs, your ability to open and fund a Roth IRA is dependent on your modified adjusted gross income (MAGI) level and your tax filing status. The maximum you can contribute gradually tapers off for higher earners, and income thresholds are typically updated yearly to reflect cost-of-living adjustments. For example, for the 2022 tax year:2


If you’re single, head of household, or married filing separately and not living together: You can contribute the maximum amount to a Roth IRA if your MAGI is below $129,000, but you can’t contribute if your MAGI is over $144,000. Anywhere in between and your maximum contribution limit is reduced from the combined maximum of $6,000 (or $7,000 if you are over 50) - more on calculating reduced contribution limits below. 


If you’re married filing separately and living together: Your income must be below $10,000 to make contributions, and how much you can contribute depends on your MAGI. 


If you’re married filing jointly or a qualifying widow: You can contribute the maximum amount if your joint MAGI is below $204,000. Maximum contribution limits are reduced if your income is between $204,000 and $213,999, and you can’t make any contributions if your income exceeds $214,000.


Given the strict income limits, higher earners are typically better off contributing to a traditional IRA. However, financial situations differ and it’s best to consult your tax adviser for your specific situation.


How to Calculate Your Roth IRA Contribution Limit

If you’d like to calculate your contribution limit, you first need to calculate your MAGI. Your MAGI is essentially your adjusted gross income (AGI) with certain adjustments added back. Which adjustments you add back depends on the tax purpose involved. 


Each tax year, instructions to calculate your MAGI for Roth IRA purposes – and your reduced contribution amount – can be found in the IRS’s Publication 590-A, Contributions to Individual Retirement Arrangements.3


For example, instead of the maximum $6,000 contribution, a single person in their 40s with a MAGI of $134,000 can contribute only $4,020 for the 2022 tax year.4 If their income reaches $144,000, their contribution limit falls to zero. 


Remember: Calculating your MAGI and Roth IRA contribution limits can be complex. When making major saving and retirement planning decisions, please consult with a professional tax advisor or personal finance expert for questions related to your specific financial situation.

The Bottom Line


The annual contribution limit for Roth IRAs can change according to your modified adjusted gross income (MAGI) and filing status. Roth IRAs can be a beneficial way to save for retirement particularly if you prefer to contribute taxed income and fall under the maximum income limits. But if you prefer to contribute pre-tax income or have a higher MAGI, a traditional IRA may be a better fit. Speaking to a tax advisor can help you understand the best approach for your situation.

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