How to Max Out Your Roth IRA This Year

Setting aside money for investment in an IRA is a great way to prepare for retirement, but the IRS sets a maximum contribution limit each year: The maximum you can contribute to a Roth IRA is $7,000 in 2024 and 2025 ($8,000 if age 50 and older). If that's your goal, and you're wondering how much to contribute to a Roth IRA every month, that would be around $583 per month if you're under 50, or $666 if you're 50 or older.

However, there are a few factors to consider when deciding how much to contribute to your Roth IRA, plus tips for how to max it out if you decide that's the right choice.

Is it smart to max out a Roth IRA?

Most people will want to save for retirement in a variety of accounts, including a 401(k) or other workplace retirement plan if you have one available, and an IRA or Roth IRA. How much you should save in each — and whether you should max out — will vary based on your goals, tax situation and other factors. Here are some pros and cons to maxing out your Roth IRA:

Pros:

• Unlike with a 401(k) plan, you have until the tax filing deadline, usually in mid-April, to add money to your Roth IRA for the prior tax year. This gives you more time to max out.

• Also unlike 401(k) plans and traditional IRAs, you won’t owe taxes on your eligible Roth IRA withdrawals. This can provide a tax savings in retirement.

• In most cases, unless you save the equivalent of the tax deduction you realize from using a traditional IRA, you'll end up with more money in retirement from maxing out a Roth IRA, due to that ability to take distributions without taxes.

Cons:

• Contributing to a Roth IRA is best for money you won’t need until retirement. If you have more pressing financial needs, such as short-term debt, it might be worth getting those liabilities squared away first and reducing or pausing Roth IRA contributions until you've done so.

• If you're not contributing enough to get an employer match from your 401(k) — if available — you should maximize that match before contributing to outside accounts like a Roth.

• Unlike the traditional IRA, there is no upfront tax break for contributing to a Roth IRA.

How to max out your Roth IRA

1. Open an account

Setting up a Roth IRA takes only minutes. Consider looking for providers with low account minimums; low or no account fees and fund minimums; a large selection of no-transaction-fee mutual funds and commission-free ETFs; and the type of customer service and educational resources you desire. For guidance, check out our picks for the best Roth IRA providers.

To actually open the account, you'll need some personal information handy, including your Social Security number, address and bank or brokerage account information, so you can link a funding source.

2. Calculate (or estimate) how much you’ll need in retirement

Saving up to 15% of your pretax income each year for retirement is one rule of thumb. As mentioned above, that's likely more than you can contribute to a Roth IRA each year, so you may need to save in multiple accounts, including the Roth, your 401(k) plan and even a taxable account. Use a retirement calculator to check how much you need to contribute to your Roth IRA and other retirement accounts to build enough of a retirement nest egg.

3. Set manageable goals for contributions

Retirement planning is a decades-long journey, and shorter-term goals, like setting aside the annual IRA maximum, can be daunting for many people. This is money you should try to leave untouched, and growing, for decades.

Breaking down that goal into more manageable weekly or monthly amounts like those referenced above can help. Opt to contribute on a manageable schedule, such as the same day each month. You can set up automated transfers so the process is hands-off.

4. Invest your Roth IRA

Once you’ve opened an account, you'll need to select investments — the Roth IRA itself is just a vessel for your contributions; it is not an investment. To benefit from both diversification and low costs, consider a portfolio constructed of index funds and exchange-traded funds. (Want more details? See these tips on how to invest your IRA.)

When investing your account, automation is again your friend: Set it up so your contributions are automatically invested, if possible, to benefit from dollar-cost averaging. This is a strategy of spreading out investment purchases over time to ensure you don’t invest all your money when prices are high.

5. Know your limits

Don’t despair if you can’t max out a Roth IRA this year. This goal may take time to achieve. Even a few hundred dollars invested can balloon to several thousand dollars over a decade or two.