For 2023, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:
- $6,500 ($7,500 if you're age 50 or older), or
- If less, your taxable compensation for the year
For 2022, 2021, 2020 and 2019, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:
- $6,000 ($7,000 if you're age 50 or older), or
- If less, your taxable compensation for the year
The IRA contribution limit does not apply to:
- Rollover contributions
- Qualified reservist repayments
Deducting your IRA contribution
Your traditional IRA contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels.
- IRA deduction limits
Roth IRA contribution limit
In addition to the general contribution limit that applies to both Roth and traditional IRAs, your Roth IRA contribution may be limited based on your filing status and income.
- 2023 - Amount of Roth IRA Contributions You Can Make for 2023
- 2022 - Amount of Roth IRA Contributions You Can Make for 2022
IRA contributions after age 70½
For 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs.
For 2019, if you’re 70 ½ or older, you can't make a regular contribution to a traditional IRA. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.
Spousal IRAs
If you file a joint return, you may be able to contribute to an IRA even if you didn’t have taxable compensation as long as your spouse did. Each spouse can make a contribution up to the current limit; however, the total of your combined contributions can’t be more than the taxable compensation reported on your joint return. See the Kay Bailey Hutchison Spousal IRA Limit in Publication 590-A.
If neither spouse participated in a retirement plan at work, all of your contributions will be deductible.
Can I contribute to an IRA if I participate in a retirement plan at work?
You can contribute to a traditional or Roth IRA even if you participate in another retirement plan through your employer or business. However, you may not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level.
Examples
- Danny, an unmarried college student earned $3,500 in 2020. Danny can contribute $3,500, the amount of his compensation, to his IRA for 2020. Danny's grandmother can make the contribution on his behalf.
- John, age 42, has a traditional IRA and a Roth IRA. He can contribute a total of $6,000 to either one or both for 2020.
- Sarah, age 50, is married with no taxable compensation for 2020. She and her spouse, age 48, reported taxable compensation of $60,000 on their 2020 joint return. Sarah may contribute $7,000 to her IRA for 2020 ($6,000 plus an additional $1,000 contribution for age 50 and over). Her spouse may also contribute $6,000 to an IRA for 2020.
Tax on excess IRA contributions
An excess IRA contribution occurs if you:
- Contribute more than the contribution limit.
- Make a regular IRA contribution for 2019, or earlier, to a traditional IRA at age 70½ or older.
- Make an improper rollover contribution to an IRA.
Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. The tax can't be more than 6% of the combined value of all your IRAs as of the end of the tax year.
To avoid the 6% tax on excess contributions, you must withdraw:
- the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
- any income earned on the excess contribution.
See Publication 590-A for certain conditions that may allow you to avoid including withdrawals of excess contributions in your gross income.
If you're interested in contributing to a Roth IRA but your income exceeds IRS limits, you still have options to save for retirement in a tax-smart way.
High earners may have a variety of options for saving for retirement—but income limits mean that direct contributions to Roth IRAs may not be among them.1 This is unfortunate because Roth IRAs offer tax-free earnings growth and withdrawals in retirement,2 making them a potentially valuable part of a broader investing and tax-planning strategy. Having both Traditional and Roth accounts can help with tax diversification in retirement. Here are some strategies to consider.Are you getting the most from your 401(k)s?
Maxing out contributions to a traditional 401(k) is a good place to start. Such accounts have no income phase-out limits, so you can generally contribute the lesser of your income or $20,500 (plus an additional $6,500 if you are 50 or older). Pre-tax contributions to these accounts reduce your taxable income, and potential earnings will grow on a tax-deferred basis—though distributions in retirement are subject to taxation at ordinary income rates in the future.
If your employer also offers access to a Roth 401(k), then you could consider using one to set aside some post-tax retirement savings. Like their traditional 401(k) counterparts, Roth 401(k)s don't have income phase-outs. So even if you don't qualify for a Roth IRA because your income is above IRS limits, you can make after-tax contributions to a Roth 401(k). Potential earnings will grow tax-free, and you pay no taxes when you take withdrawals over the age of 59 1/2, as long as you've held the account for at least five years.
If you own both a traditional 401(k) and a Roth 401(k), it's important to note that the annual contribution limit applies across all of your 401(k) accounts, not on each account individually.
Consider a Roth conversion
Converting some or all of the funds in a traditional IRA into a Roth IRA is another option. This entails taking funds from traditional IRAs, paying ordinary income tax on those funds, and rolling them into a Roth IRA. This can make sense particularly if you expect to be in a higher tax bracket in the future and have a long time horizon.
Some advisors also see a so-called backdoor Roth IRA as another way to secure the tax features provided by Roth accounts. It's a unique strategy, but it could work for you. The backdoor Roth involves opening a traditional IRA, making non-deductible contributions to it, and rolling over those funds to a Roth IRA at a later date. When those funds are rolled over, you'll have to pay taxes on any appreciation that occurred prior to the conversion; in addition, the pro-rata rule may also apply. However, once in the Roth IRA, the savings are eligible to grow and be distributed tax-free.
What about non-deductible IRAs?
Does it ever make sense to contribute to a traditional IRA even if you can't deduct the contributions? At the very least, you could still enjoy the potential for tax-deferred growth in the account.
"Think carefully before considering this option," says Rob Williams, managing director of financial planning at the Schwab Center for Financial Research. "You wouldn't be getting any upfront tax break, and future withdrawals of growth on your original contribution would be taxed at your ordinary income tax rate."
It's possible that the future tax rates you'd pay would be higher than what you would owe if you'd invested in a tax-efficient way in a regular taxable brokerage account. "With today's low long-term capital gains and qualified dividend rates, non-deductible contributions to a traditional IRA may make less sense," Rob says.
As of 2022, long-term capital gains are taxed at a federal rate of either:
- 0% for single filers with taxable income up to $41,675 or joint filers with taxable income up to $83,350.
- 15% for single filers with taxable income between $41,676-$459,750 or joint filers with taxable income between $83,351-$517,200.
- 20% for single filers with taxable income above $459,750 or joint filers with taxable income above $517,200.
In addition, single filers with an adjusted gross income (AGI) over $200,000 or joint filers with AGI over $250,000 may have to pay the Medicare surtax of 3.8%.
Tax-efficient investing in a taxable account
There are many tax-efficient ways to invest in taxable accounts. If you don't trade often, individual stocks, as well as most exchange-traded funds (ETFs) and index mutual funds, can result in a lower tax bill.
You may owe only the long-term capital gains tax rate on earnings if you sell an investment held longer than a year at a gain, which is generally lower than the tax rates on ordinary income. There may be some distributions along the way, but qualified dividends from stocks are generally taxed at the long-term capital gain tax rate, and ETFs and index funds can be managed tax-efficiently.
Having some money in taxable accounts can provide opportunities to reduce your tax bill by strategically harvesting losses. That's not something you can do in your 401(k) or any IRA. Investing in tax-advantaged municipal bonds or muni bond funds, depending on your tax bracket, can help too.
Saving in a taxable account can also be helpful for estate planning goals. If you hold long-term investments in a traditional brokerage account, you can donate low-cost-basis securities to charity for a full fair market value deduction and no capital gains tax. You can also leave your appreciated shares to heirs who would receive a step-up in cost basis.
Finally, as noted above, having money in taxable accounts as well as tax-advantaged accounts can give you greater flexibility and access to savings for needs prior to age 59 1/2—the minimum age from which you can generally withdraw from traditional IRAs and qualified retirement plans without a 10% early withdrawal penalty.3 It can also provide flexibility in managing your tax bracket as you plan for post-retirement cash flows. "This sort of tax diversification can be helpful, no matter your future tax rate," Rob says.
1For 2022, as a single filer, your Modified Adjusted Gross Income (MAGI) must be under $144,000 to contribute to a Roth IRA. As a joint filer, it must be under $214,000.
2You must be 59 1/2 and have held the Roth IRA for 5 years before tax-free withdrawals on earnings are permitted.
3Subject to certain exceptions, for hardship or other situations specified by the IRS.
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Investors should consider carefully information contained in the prospectus or, if available, the summary prospectus, including investment objectives, risks, charges, and expenses. Please read it carefully before investing.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
Investing involves risk including loss of principal.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.
Roth IRA conversions require a 5-year holding period before earnings can be withdrawn tax free, and subsequent conversions will require their own 5-year holding period. In addition, earnings distributions prior to age 59 1/2 are subject to an early withdrawal penalty.
Tax‐exempt bonds are not necessarily a suitable investment for all persons. Information related to a security's tax‐exempt status (federal and in‐state) is obtained from third parties, and Schwab does not guarantee its accuracy. Tax‐exempt income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from bond funds and discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax.
A rollover of retirement plan assets to an IRA is not your only option. Carefully consider all of your available options which may include but not be limited to keeping your assets in your former employer's plan; rolling over assets to a new employer's plan; or taking a cash distribution (taxes and possible withdrawal penalties may apply). Prior to a decision, be sure to understand the benefits and limitations of your available options and consider factors such as differences in investment related expenses, plan or account fees, available investment options, distribution options, legal and creditor protections, the availability of loan provisions, tax treatment, and other concerns specific to your individual circumstances.