The benefits of the Roth IRA are so good, Congress made them exclusive: Those who earn too much are not eligible to participate in this type of individual retirement account.
2017 Roth IRA income limits
The IRS sets the income eligibility rules for the Roth IRA each year. The limits are based on modified adjusted gross income and first phase out the Roth IRA contribution limit before eliminating the ability to contribute altogether.
Here are the income limits for 2017:
|Filing status||2017 modified AGI||Maximum contribution|
|Married filing jointly or qualifying widow(er)||Less than $186,000||$5,500 ($6,500 if 50 or older)|
|$186,000 to $195,999||Contribution is reduced|
|$196,000 or more||Not eligible|
|Single, head of household or married filling separately (if you did NOT live with spouse during year)||Less than $118,000||$5,500 ($6,500 if 50 or older)|
|$118,000 to $132,999||Contribution is reduced|
|$133,000 or more||Not eligible|
|Married filing separately (if you lived with spouse at any time during year)||Less than $10,000||Contribution is reduced|
|$10,000 or more||Not eligible|
Note that you also can’t contribute more than you earn, unless you file married filing jointly and you’re contributing on behalf of your spouse. In that case, your combined IRA contributions can’t be more than your reported taxable compensation.
If, on the other hand, your income is too high to qualify for a Roth, you may want to take the backdoor route: A backdoor Roth IRA allows retirement savers to convert a traditional IRA to a Roth IRA, gaining access to tax-free distributions.
The fine print: If you deducted the contributions to that traditional IRA, you’ll need to pay taxes on the conversion. If you’re opening a traditional IRA specifically to convert to a Roth, however, you can fund it with after-tax dollars and easily convert with no additional tax burden. For more on this strategy, see our guide to the backdoor Roth IRA.
Contributing a reduced amount
If you fall into the income window that allows you to contribute but reduces your annual contribution limit, you can calculate your maximum contribution using our Roth IRA calculator, which will also project your balance at retirement and estimate your potential tax savings.
We recommend contributing to a Roth if you’re eligible, even if your contribution is reduced — because your money will be contributed after taxes, you get to take distributions from a Roth IRA tax-free in retirement. Assuming you follow the Roth IRA withdrawal rules — and you should — you won’t pay taxes on any investment growth.
You’ll gain some valuable tax diversification in retirement: Because Roth IRA distributions aren’t included in your income in retirement, pulling money from that pot in addition to a traditional IRA or 401(k) could allow you to keep your income in a lower tax bracket, potentially reducing the taxes on your Social Security benefits and lowering Medicare premiums that increase at higher income levels.
Have more questions about Roths? Read our Roth IRA explainer.