The maximum annual contribution amount for a Roth IRA is $5,500 ($6,500 for those 50 or older) in 2018. This maximum annual amount applies to all of your traditional and Roth IRAs, combined.
The IRS also sets income limits for Roth IRAs each year — at higher incomes, the Roth IRA contribution limit begins to phase out until the ability to contribute is eliminated completely.
Roth IRA limits for 2018
|Filing status||2018 modified AGI||Maximum contribution|
|Married filing jointly or qualifying widow(er)||Less than $189,000||$5,500 ($6,500 if 50 or older)|
|$189,000 to $198,999||Contribution is reduced|
|$199,000 or more||Not eligible|
|Single, head of household or married filling separately (if you did not live with spouse during year)||Less than $120,000||$5,500 ($6,500 if 50 or older)|
|$120,000 to $134,999||Contribution is reduced|
|$135,000 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|
These income limits are based on modified adjusted gross income, which is your adjusted gross income with some deductions added back in.
» Don’t have an account? Here’s how to open a Roth IRA
The fine print on Roth IRA contribution limits is that you can’t contribute more than your taxable compensation for the year. That means that if your taxable income is $3,000, your cap on Roth IRA contributions is also $3,000 for that year. If you don’t have any taxable earnings during the year, you can’t contribute.
The one exception is the spousal IRA, which allows a nonworking spouse to contribute to an IRA based on the taxable income of the working spouse.
Contributing a reduced amount
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 also 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. Here are some pros and cons of Roth IRAs.
What to do if you contribute too much to a Roth IRA
No one is going to cry for you if you’ve saved too much for retirement, but in this case, maybe they should: Contributions in excess of the annual limit can trigger a penalty from the IRS that could easily wipe out any investment income.
But here’s the good news: You’re allowed to backtrack. If you realize your mistake prior to filing your tax return, withdraw the excess contributions and the earnings you received on them. If you’ve already filed, you can remove the excess and earnings within six months, and file an amended tax return. In both cases, you’ll pay taxes on the earnings but no penalty.
Contributions in excess of the annual limit can trigger a penalty from the IRS that could easily wipe out any investment income.
The other option is to reduce the following year’s contribution by the excess amount, but you’ll pay a 6% penalty on the excess that was contributed, for every year it remains in the account.
The lesson: Keep track of your Roth IRA contributions, especially if you use more than one account. If you have questions about removing excess funds, it may make sense to work with a tax advisor.
» MORE: Other important Roth IRA rules to know