Roth IRAs have contribution limits that are set by the Internal Revenue Service (IRS) each year. These contribution limits can change over time, so it is important to stay up to date with the current limits.

Contribution Limits

For tax year 2022, the contribution limit for a Roth IRA is $6,000 for individuals under age 50, and $7,000 for individuals age 50 or older. These limits apply to total contributions made to all IRAs for the year, including both traditional and Roth IRAs.

Contribution Rules

There are several rules that govern contributions to a Roth IRA:

1. Age: Individuals can make contributions to a Roth IRA at any age, as long as they have earned income.
2. Income: There are income limits that determine whether an individual can make a full contribution, a partial contribution, or no contribution at all to a Roth IRA. For tax year 2022, individuals with modified adjusted gross incomes (MAGIs) of $140,000 or less ($208,000 or less for married couples filing jointly) can make a full contribution. Individuals with MAGIs between $140,000 and $155,000 ($208,000 and $218,000 for married couples filing jointly) can make a partial contribution. Individuals with MAGIs above $155,000 ($218,000 for married couples filing jointly) are not eligible to make contributions to a Roth IRA.
3. Timing: Contributions to a Roth IRA must be made by the tax filing deadline (typically April 15th) for the previous tax year. For example, contributions for tax year 2022 must be made by April 15th, 2023.
4. Source of Funds: Contributions to a Roth IRA can be made from earned income, such as wages, salaries, or self-employment income. Contributions cannot be made from investment income, such as dividends or capital gains.

Example Scenarios

Let’s take a look at a few example scenarios to illustrate how these contribution rules work in practice.

Scenario 1: John is 35 years old and has a MAGI of $125,000. He has earned income of $50,000 for the year. How much can he contribute to a Roth IRA for tax year 2022?

Answer: John can make a full contribution of $6,000 to a Roth IRA for tax year 2022, since his MAGI is below the limit for full contributions.

Scenario 2: Lisa is 60 years old and has a MAGI of $200,000. She has earned income of $80,000 for the year. How much can she contribute to a Roth IRA for tax year 2022?

Answer: Lisa can make a full contribution of $7,000 to a Roth IRA for tax year 2022, since she is over age 50 and her MAGI is below the limit for full contributions.

Scenario 3: Mark is 25 years old and has a MAGI of $180,000. He has earned income of $30,000 for the year. How much can he contribute to a Roth IRA for tax year 2022?

Answer: Mark cannot make a contribution to a Roth IRA for tax year 2022, since his MAGI is above the limit for partial contributions.

Scenario 4: Sarah is 45 years old and has a MAGI of $150,000. She has earned income of $60,000 for the year. She contributed $3,000 to a traditional IRA earlier in the year. How much can she contribute to a Roth IRA for tax year 2022?

Answer: Sarah is 45 years old with a MAGI of $150,000 and earned income of $60,000 for the year. She had also contributed $3,000 to a traditional IRA earlier in the year.

Since Sarah’s MAGI is below the limit for full contributions, she can make a full contribution to a Roth IRA for tax year 2022. However, her total contributions to all IRAs, including traditional and Roth IRAs, cannot exceed the contribution limit for the year.

For tax year 2022, the contribution limit for individuals under age 50 is $6,000, and for individuals age 50 or older, it is $7,000. Since Sarah is under age 50, she can contribute up to $6,000 to a Roth IRA for tax year 2022.

However, Sarah has already contributed $3,000 to a traditional IRA earlier in the year. Therefore, her total contributions to all IRAs for the year cannot exceed $6,000. This means that Sarah can contribute up to $3,000 to a Roth IRA for tax year 2022, in addition to her $3,000 contribution to the traditional IRA.

It is important to note that Sarah’s ability to contribute to a Roth IRA may also be affected by other factors, such as whether she has already made contributions to other retirement accounts, such as a 401(k) or 403(b). It is always a good idea to consult a financial advisor or tax professional to determine the best course of action for individual retirement savings.