Roth IRA Income & Contribution Limits for 2023

Anyone with earned active income (wages, self-employment income, etc.) can contribute to a Roth IRA. Passive income, including rental income and investment income, does not qualify for Roth IRA contributions. There is no age restriction for contributing to a Roth IRA.

However, the IRS has retirement income and filing status limits that affect eligibility. It sets caps based on your modified adjusted gross income (MAGI). The higher your MAGI, the less you can contribute to a Roth until you reach a cap and cannot contribute at all.

A fundamental element of the IRS’s calculations determining Roth IRA contribution levels is modified adjusted gross income (MAGI).

Roth IRAs have maximum contribution limits with no minimums. For 2023, the maximum individual contribution limit is $6,500 for individuals under 50. People aged 50 and older can make an additional $1,000 catch-up contribution ($7,500 total).

Contribution limits apply if your income and filing status meet eligibility criteria. If your income exceeds the MAGI limit, you may get phased out of making any direct Roth IRA contributions.

If such a situation occurs, you can utilize a backdoor Roth IRA conversion strategy to contribute funds to your Roth account. You make a non-deductible contribution to a traditional IRA, then convert that account into a Roth account.

To calculate your maximum allowable contribution to a Roth IRA, add up your income for the year: wages, salaries, tips, bonuses, commissions and self-employment income. Don’t include interest, dividends, capital gains, pensions, annuities or Social Security benefits. If you’re below the threshold for your living situation, you can make the maximum contribution.

Are you 50 or older? If so, add in your $1,000 catch-up contribution.

Verify the IRS’s contribution limits ($6,500 for those under 50 or $7,500 for 50 and older in 2023) and subtract any contributions made to other IRAs, such as a traditional IRA. But contributions made under a SEP plan do not affect the amount you can contribute to an IRA on your own behalf.

You can use a Roth IRA calculator or an IRS table to find out how much you can contribute based on your MAGI and filing status. Consult with a financial advisor or tax professional if you have questions or doubts about calculating your maximum allowable contribution.

Maximizing your Roth IRA contributions allows you to get the most out of your retirement planning and investments. The tip for maximizing your contributions is to create your account early on and max out your contributions yearly.

After you’ve created your account and have started to max out your contributions, you can take advantage of catch-up contributions when you turn 50.

Ensure the money doesn’t sit in a cash (or money market) fund over the long term. Instead, pick investment funds appropriate for your age, risk tolerance and investment goals.

Other strategies include looking for ways to reduce your MAGI and making use of the backdoor Roth IRA conversion.

There are added considerations for Roth IRA limits to be aware of. They include the impact of marriage, Roth IRA conversions and changes in your annual income. Learn how these affect your contribution eligibility.

There are no limits on the number of IRA accounts you can have, but you can only contribute to the maximum level for each type of IRA you have. In short, even if you have five Roth IRA accounts, you can only put $6,500 total into them during 2023.

You can use a backdoor Roth IRA conversion more than once, although there may be better long-term investment strategies to investigate.

A Roth IRA conversion turns a traditional, SEP or SIMPLE IRA — or employer-sponsored retirement account such as a 401(k) — into a Roth IRA. But when you roll over a traditional 401(k) to a Roth IRA, you’ll owe income taxes on that money in the year when you make the switch.

Conversions don’t affect contribution limits. In addition, conversion amounts are separate from contribution limits, and there’s no limit to the amount of money you can convert. However, it’s crucial to consider the tax implications of any conversion.

Income changes during the year may move you into a different eligibility range, meaning your Roth IRA contribution eligibility may be affected. Reassess your eligibility based on the updated income. If your income stays within the eligibility range or falls below the eligibility range for Roth IRA contributions in a tax year, you can contribute up to the maximum allowed limit.

If your income exceeds the MAGI limit, you might find yourself phased out of making direct contributions to your Roth account. In that case, you may have to re-characterize your contributions or pay taxes on excess contributions. Another option would be to explore alternative retirement investment options based on your new income level.