Stashing money away in a Roth IRA (individual retirement account) can lead to huge rewards during retirement.
For example, if you managed to build a million-dollar Roth IRA, you could withdraw all your funds 100% tax-free after you reach age 59 1/2 and have checked the boxes on the other rules.
But having a chance at building a massive Roth IRA will depend on several factors. For one, you have to contribute money to the account and invest in assets that can supercharge your portfolio. The good news is that the Roth IRA contribution limits for 2024 have been bumped up, so you can tuck away more money in your account to get you closer to your retirement goals.
A good time to plan ahead for 2024
Next year, the Roth IRA contribution limit for savers under 50 will jump to $7,000, up from $6,500 in 2023. If you’re aiming to contribute the maximum amount to a Roth IRA, you can stash away roughly $583 every month to hit your goal in a year.
As has been the case, the contribution limits for savers over a certain age are even sweeter. If you are 50 or older by the end of 2024, you can tack on up to $1,000 more in “catch-up contributions,” bringing your contribution limit up to $8,000.
But there’s a catch: You need to earn enough money during the year to contribute the maximum amount to a Roth IRA. And that money must be in the form of earned income. So interest income, dividends, pension income, Social Security benefits, and other unearned income won’t count.
Let’s say you are 75 years old in 2024. If you earn less than $8,000 in 2023 — say, for example, that you make $6,000 from part-time work at a retail store — your Roth IRA contribution would be limited to your taxable compensation. Your annual contributions to a Roth IRA can’t exceed your earnings for the year.
If you don’t have a Roth IRA yet, this may be a good time to consider opening an account. Determine your goals, weigh the pros and cons, and estimate your potential income to determine if you’ll qualify to make contributions for 2024.
The biggest Roth IRA contribution limit yet
If you check out the Roth IRA contribution caps from 2018 to 2024, you’ll see why next year’s limit is a big deal.
The limits are not increased often. The IRS announced a rise in the contribution limit to $6,500 in 2023 for savers under 50. But before that, the max was stuck at $6,000 for four years in a row.
|Year||Roth IRA Contribution Limit (Savers Under 50)||Roth IRA Contribution Limit (Savers 50 and over)|
The Roth IRA contribution window for 2024 opens on Jan. 1, 2024. You’ll have until April 15 of the following year to make your contributions. So if you’re aiming to max out your Roth IRA for 2024, you have until April 15, 2025 to reach your goals.
It’s worth noting that the IRA contribution limits also apply to traditional IRAs. You can contribute to both accounts if you meet the eligibility requirements. However, your combined contributions for the year can’t go over $7,000 (or $8,000 if you’re 50 or older).
Don’t let the Roth IRA pass you by
Retirement savers will enjoy the biggest contribution limit increases that we’ve ever seen next year. So if you haven’t been able to contribute to a Roth IRA in the past due to income limits or other reasons, you can set aside extra funds in your account in 2024. And the more money you contribute, the more money you’ll have to invest in your favorite assets and grow your portfolio.