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Track how much your retirement investments could grow over time with our Roth IRA calculator and get started preparing for your future by using it today.
How Much Should I Be Putting in a Roth IRA?
Deciding how much to contribute to a Roth IRA is a personal decision that depends on your income, financial obligations, tax bracket, and other factors.
However, the tax advantages on qualified distributions from a Roth IRA and its capital gains make it a favorable investment vehicle.
You can contribute up to a max of $6,000 of your earned income (or up to the amount of your earned income if it was less than $6,000) for the 2022 tax year. If your goal is to contribute the maximum amount for 2022, your monthly contribution will be $500.
Additionally, if you are 50 or older, then you may make catch-up contributions for a total of $7,000.
To illustrate the value of compounding regular contributions to a Roth IRA, consider the following example. Let’s say you contribute the max of $6,000 annually over a 20-year period with a modest average interest accrual of 6%.
Your total contributions over that period would be $126,000, but the estimated value of your Roth IRA balance would be nearly $255,000!
Roth IRA Contributions for 2023
|Filing status||Modified gross income (AGI)||Contribution limit|
|married filing jointly or qualifying widow(er)||< $218,000||up to the limit|
|married filing jointly or qualifying widow(er)||> $218,000 but < $228,000||a reduced amount|
|married filing jointly or qualifying widow(er)||> $228,000||zero|
|married filing separately and you lived with your spouse at any time during the year||< $10,000||a reduced amount|
|married filing separately and you lived with your spouse at any time during the year||> $10,000||zero|
|single, head of household, or married filing separately and you did not live with your spouse at any time during the year||< $138,000||up to the limit|
|single, head of household, or married filing separately and you did not live with your spouse at any time during the year||> $138,000 but < $153,000||a reduced amount|
|single, head of household, or married filing separately and you did not live with your spouse at any time during the year||> $153,000||zero|
Amount of your reduced Roth IRA contribution
If the amount you can contribute must be reduced, figure your reduced contribution limit as follows.
- Start with your modified AGI.
- Subtract from the amount in (1):
- $218,000 if filing a joint return or qualifying widow(er),
- $-0- if married filing a separate return, and you lived with your spouse at any time during the year, or
- $138,000 for all other individuals.
- Divide the result in (2) by $15,000 ($10,000 if filing a joint return, qualifying widow(er), or married filing a separate return and you lived with your spouse at any time during the year).
- Multiply the maximum contribution limit (before reduction by this adjustment and before reduction for any contributions to traditional IRAs) by the result in (3).
- Subtract the result in (4) from the maximum contribution limit before this reduction. The result is your reduced contribution limit.
Roth IRA Definitions
Below are some key definitions of terms associated with Roth IRAs. Understanding their meaning is essential for effectively incorporating this type of retirement account into your investment portfolio.
Roth IRA: A type of individual retirement account known for its favorable tax status. Your contributions are made after-tax (i.e., no tax-deferral like a traditional IRA or 401(k), but your capital gains and distributions are tax-free.
Annual contribution limits: The amount you can contribute to your Roth IRA each year. The current limit is $6,000 for 2022 unless you qualify for a catch-up contribution of $7,000.
Modified adjusted gross income (MAGI): Your modified adjusted gross income (MAGI) is your income after taking certain tax deductions and excluding certain tax-exempt interests. This number is important for Roth IRAs because it determines if you can contribute to a Roth IRA or if you are phased out. For example, a single taxpayer with a MAGI of more than $144,000 could not contribute to a Roth IRA in 2022.
Filing status: Your tax filing status can be either single, married, or married filing separately. Your filing status also affects the MAGI phase-out limits for contributing to a Roth IRA. Single taxpayers phase out with a MAGI over $144,000 but married taxpayers don’t phase out of Roth IRA contributions unless their MAGI is over $214,000.
Inflation: Inflation is the weakening of your money’s purchasing power because of increases in the price of resources and consumer goods. How you invest contributions to a Roth IRA is important for beating inflation and maintaining the value of your portfolio.
Retirement age: The age at which you plan to retire. Knowing your retirement age is key to knowing how much you need to save and how much you can take for distributions from your Roth IRA based on your life expectancy.
Life expectancy: The anticipated length of your life considers personal health factors as well as national averages. Subtracting your retirement age from your life expectancy gives you an estimate of how long your Roth IRA and other savings will last to sustain your livelihood.
Expected rate of return: The amount you anticipate your investments in a Roth IRA to grow over a period (e.g., a year). Using our Roth IRA growth calculator, you can see how the size of your portfolio can change with different rates of return.
Required minimum distribution (RMD): The amount you must take as a distribution from your Roth IRA under the law, which begins once you turn 72.
Compound interest: The reason for the exponential growth of your Roth IRA comes from earning interest on top of previously earned interest.
Monthly retirement spending: The amount you anticipate spending every month in retirement for your expenses like food, housing, and healthcare.
Catch-up contribution: Workers over the age of 50 can make larger catch-up contributions to their Roth IRA ($7,000 in 2022 compared to the standard contribution amount of $6,000).
What is better a 401(k) or roth IRA?
Both are important retirement account choices that offer different value propositions. For example, a 401(k) offers greater contribution amounts (e.g., $20,500 in 2022), but your distributions from a Roth IRA, including its gains, are tax-free.
How to start a roth IRA?
You can start a Roth IRA through a variety of companies that offer wealth management services.
How is our Roth IRA calculator different than Dave Ramsey, Fidelity, or NerdWallet’s?
All of the calculators will provide you with similar data, but our calculator is designed for simplicity and accuracy when it comes to overall user experience.
Save better for retirement with Traditional, Roth, and SEP IRAs, guidance, and automated strategies to help you grow your money and save on taxes.
I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.More Posts