Roth IRAs come with great tax benefits that are hard to ignore, but there are limits to how much you can contribute each year. In 2023, the maximum allowable contribution to a Roth IRA is just $6,500 for those below 50. Assuming you are allowed to make the maximum contribution, you can save up to $6,500 in after-tax income in your Roth IRA account in 2023.
And if you have a Roth IRA, remember there are contribution limits based on how much money you make. For single filers, the amount you're able to contribute phases out between $125,000 and $140,000 in income. For married couples filing jointly, the phase-out range is between $198,000 and $208,000. If you earn more than the phase-out amount, you won't be able to contribute to a Roth IRA.
Dear Liz: I have been contributing to my young adult children's Roth IRA accounts for the past few years to get them started on retirement saving. I understand the contribution limits for Roth IRAs, but I'm wondering if there are any other restrictions that I should be aware of.
A Roth IRA is a type of individual retirement account. As a tax-advantaged individual retirement account, Roth IRAs allow you to contribute up to the annual limit without having to pay taxes on the money when you withdraw it in retirement. This makes it an attractive choice for those who are looking to save for retirement and don't want to pay taxes on their withdrawals.
In 2023, you can contribute the full amount to a Roth IRA — $6,500. But keep in mind that the amount you're able to contribute may be reduced if your modified adjusted gross income is above the applicable phase-out range for your filing status. A Roth IRA is attractive because its earnings and withdrawals are tax-free, so you won't have to pay taxes on money you withdraw from the account during retirement.
Currently SIMPLE IRAs and SEP IRAs do not allow for Roth contributions. The bill would change this, allowing for SIMPLE Plans to accept Roth contributions. This would be a great benefit to those who want to save for retirement and take advantage of the tax-free withdrawals that a Roth IRA provides.
The Roth IRA is an individual retirement account that comes with perks that traditional IRAs don't offer. The biggest benefit of the Roth is that it offers tax-free growth and withdrawals. This means that the money you contribute to your Roth IRA will grow tax-free, and when you withdraw it in retirement, you won't have to pay taxes on it.
Another benefit of a Roth IRA is that it doesn't require you to begin taking distributions at age 70 ½ like a traditional IRA does. This means that you can keep your money invested in your Roth IRA for as long as you want, allowing it to continue to grow tax-free.
One of the newest benefits of the Roth IRA is that, beginning Jan. 1, 2024, beneficiaries of 529 plans open for 15 years or longer will be able to rollover up to $35,000 in excess funds to a Roth IRA. This will allow those who have saved in a 529 plan to take advantage of the tax-free growth and withdrawals that a Roth IRA provides.
Finally, a Roth IRA can also be used for estate planning purposes. If you pass away, your beneficiary will be able to take distributions from your Roth IRA tax-free. This can be a great way to pass on wealth to your heirs without having to worry about them paying taxes on the money.
When it comes to Roth IRAs, there are a lot of great benefits that you should be aware of. The contribution limits are just one part of the equation. Be sure to consider all of the other benefits of a Roth IRA before deciding if it's the right choice for you.
It's important to remember that the Roth IRA contribution limits are in place to ensure that everyone has an equal opportunity to save for retirement. If you have the ability to contribute the maximum amount, you should do so to make sure that you are taking full advantage of the tax-free growth and withdrawals that the Roth IRA offers.
It's also important to remember that there are other rules and restrictions that apply to Roth IRAs. Be sure to research these before you decide to open an account. You should also consult a financial professional to make sure that a Roth IRA is the right choice for your retirement savings goals.
Overall, the Roth IRA is a great way to save for retirement. With the contribution limits in place, you can save up to $6,500 in after-tax income in your Roth IRA in 2023. Remember to consider all of the other rules and restrictions that apply to Roth IRAs before you open an account, and to consult a financial professional to make sure it's the right choice for you.
