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How to Max Out Your Roth IRA This Year

Maxing out your Roth IRA contributions may seem intimidating at first, but these tips will help you hit that contribution limit this year.
April 16, 2019
Investing, IRA, Roth IRA
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Remember the first time your speedometer crept past 70, 80 or even 90 miles per hour? An exhilarating, if fleeting, experience. Maxing out your Roth IRA, on the other hand? Less exhilarating, but much more rewarding.

A Roth IRA is an attractive individual retirement account because it gives you access to a broader array of investments that often have lower fees than employer-sponsored plans. And unlike most tax-related contributions, you have until mid-April to add money to your IRA for the prior tax year.

For tax year 2019, you can contribute up to $6,000 to a Roth IRA, up from $5,500 in 2018 (people 50 and older can contribute an additional $1,000). That’s good news for savers — and the following tips will keep you on track for maxing out contributions.

1. Open an account

You’ll need an eligible account to max out your Roth IRA contributions. Why IRA the Roth way? These accounts offer valuable tax advantages: Money and investment earnings grow tax-free, and there’s no income tax on withdrawals during retirement. Plus, you’ll benefit from compounding — that is, earning interest on both investments and interest over time.

If you’re currently in a low tax bracket, it’s worth considering a Roth IRA because your tax rate may be higher at retirement.

The primary advantage of Roth versus traditional IRAs comes down to taxes. With a Roth, you pay taxes upfront. In contrast, with a traditional IRA you’ll pay taxes later, when you take distributions. If you’re currently in a low tax bracket, it’s worth considering a Roth IRA because your tax rate may be higher at retirement.

Setting up a Roth IRA takes only minutes. You’ll need to decide whether you prefer an account with an online broker or a robo-advisor, depending on how actively you want to manage your investments. Once you’ve opened an account, select investments. To benefit from both diversification and low costs, consider a portfolio constructed of index funds and exchange-traded funds.

Look 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. We’ve rounded up our picks of the best brokers for Roth IRAs, which makes it easy to review providers side by side.

2. Envision your future

It can be difficult to prioritize far-off goals, especially with opportunities for instant gratification today. Experts recommend saving up to 15% of your pretax income each year for retirement.

If you don’t want to work forever, you’ll probably need to save more than what’s allowable in an employer-sponsored plan (a maximum of $19,000 for workers under age 50 for tax year 2019, an increase from $18,500 in 2018). Use a retirement calculator to check whether you’re on track.

3. Set manageable goals

Retirement planning is a decades-long journey, and shorter-term goals, like setting aside $6,000, can be daunting for many people. This isn’t the type of loose change you likely have sitting around — and it’s money you should try to leave untouched, and growing, for decades.

Breaking down that goal into a more manageable weekly or monthly amount may help. Maxing out the 2019 allowable amount works out to about $16.44 a day, roughly $115 each week or $500 monthly.

This isn’t the type of loose change you likely have sitting around — and it’s money you should try to leave untouched, and growing, for decades.

With those numbers in mind, set up a schedule for making regular contributions to your Roth IRA. Don’t go for the extremes, such as once a day or once a year. Instead, opt for a manageable schedule, like the same day each month. This will help ensure you don’t rack up trading costs with a schedule that’s too frequent. You also can resist the urge to time the market by avoiding a schedule that’s too infrequent.

4. Craft an investment strategy

Once you’ve opened an account, you’ll need a plan for how to invest the money you initially contributed, along with funds you’ll add in the future. Simple often is the best approach. Consider an asset allocation (the mix of different assets, such as stocks or bonds, in your account) that includes broad-market index funds, of either the mutual fund or exchange-traded fund variety. (Want more details? See these tips on how to invest your IRA.)

When setting up your account, opt for an automatic trading plan, 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.

When in doubt, be prudent: Don’t try to max out an IRA if you’re racking up high-interest debt in the meantime or don’t have enough to cover monthly expenses. Contribute whatever you can this year and resolve to increase that amount down the road.

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