In this article, we're going to discuss Roth IRA Contribution Limits. That discussion will address recent changes that affect Roth IRA accounts in 2019 and 2020, including income restrictions, as well as the limits on contributions.
Roth IRA plans are a powerful way to save for retirement. They offer the benefit of saving after-tax money, and provide a source of tax-free income in retirement. Other benefits of Roth IRAs include:
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Readers that want more detailed information than is being presented here can take a look at our article devoted to Roth IRA Rules.
The federal government has set limits on both income and contributions. The only requirement, or eligibility rule, for contributing to a Roth IRA is paid compensation. This can be in the form of wages, salaries, tips, professional fees, and even bonuses.
Compensation is the only qualifying rule for Roth IRAs. Unlike Traditional IRAs, an individual can be of any age and still make a contribution at any time for a given calendar year up until the due date of their return. This means that if someone wants to make a Roth IRA contribution for 2020, they can make it anytime between January 1, 2020 and April 15, 2021.
Another nice feature of the Roth IRA is that a spouse can also qualify for a contribution; even if a spouse has little or no compensation, as long as the couple files a joint tax return.
As mentioned earlier, the first contribution limit we're going to talk about has to do with compensation. To be eligible for a Roth IRA contribution in a given calendar year, the accountholder needs some form of compensation; but there is also an income limit. If a taxpayer's modified adjusted gross income exceeds these limits, they are no longer eligible to contribute to a Roth IRA.
This calculation is normally performed when someone completes their federal income return on Form 1040, which is sent to the IRS. Anyone unfamiliar with their AGI can pull out last year's form and look for the reference to AGI, which is normally line 36.
The income or compensation eligibility limits, as stated by AGI, for Roth IRAs for the years 2019 and 2020 appear in the table below:
| Filing Status | Full Contribution | Reduced Contribution |
| Single /Head of Household | Up to $124,000 | $124,001 to $139,000 |
| Married Filing Jointly | Up to $196,000 | $196,001 to $206,000 |
| Filing Status | Full Contribution | Reduced Contribution |
| Single /Head of Household | Up to $122,000 | $122,001 to $137,000 |
| Married Filing Jointly | Up to $193,000 | $193,001 to $203,000 |
Taxpayers with a filing status of Married Filing Separately (and living with their spouse), cannot make a Roth IRA contribution if their modified AGI is in excess of $10,000.
The second limit that applies to Roth IRAs has to do with the contribution someone can make in a single tax year. The exact number really depends on two factors. If the accountholder is age 50 or older by the end of the calendar year, then it's possible to make an additional catch-up contribution.
The second factor that can affect the level of funding has to do with whether or not a reduced contribution applies because of the income limitation previously mentioned. The current contribution limits for Roth IRAs appear in the table below:
| Tax Year | Annual Contribution Limit | Catch-Up Limit |
| 2007 | $4,000 | $1,000 |
| 2008 to 2010 | $5,000 | $1,000 |
| 2011 | $5,000 | $1,000 |
| 2012 | $5,000 | $1,000 |
| 2013 | $5,500 | $1,000 |
| 2014 | $5,500 | $1,000 |
| 2015 | $5,500 | $1,000 |
| 2016 | $5,500 | $1,000 |
| 2017 | $5,500 | $1,000 |
| 2018 | $5,500 | $1,000 |
| 2019 | $6,000 | $7,000 |
| 2020 | $6,000 | $7,000 |
| 2021 and beyond | Indexed to Inflation |
Here's an example demonstrating how this table works. In the tax year 2020, individuals eligible for a full contribution to a Roth IRA can place up to $6,000 in their account. But if that individual is age 50 or older by the end of the calendar year, then they can contribute $6,000 plus $1,000 or $7,000 in 2020.
Note: New limits are published in mid to late October.
All Roth IRA contributions are made on an after-tax basis, and therefore not tax deductible. However, the benefit of this arrangement is that all withdrawals from the account are tax-free.
Normally, an accountholder can gain access to the money in their Roth IRA through what are called qualified distributions or withdrawals. A qualified distribution is one that happens five years after they first started to contribute to a Roth IRA and they've reached age 59 1/2.
The purpose of a Roth IRA is to put money aside for retirement. Early withdrawals, or distributions, from a Roth IRA are normally subject to a 10% additional tax penalty. There are some exceptions including disabilities, first time home ownership, and the payment of higher education costs. For more information on this topic, please see our detailed article on IRA Withdrawals.
While it's certainly important to understand exactly how much someone can add to their Roth IRA each year, it's equally important to understand if their retirement funding strategy is working. To answer that question, we have some retirement tools that can help.
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