What are the Roth IRA income limits for 2024?

Key points

• A Roth IRA allows you to contribute after-tax funds and enjoy tax-free growth and withdrawals in retirement.
• You can contribute up to $7,000 per year to a Roth IRA (or $8,000 if you’re 50 or older).
• Your Roth IRA contribution may be reduced or eliminated if you earn too much. 

An individual requirement account can be an excellent way to save for retirement outside an employer-sponsored plan. These accounts have many of the same benefits as workplace retirement plans, including tax savings.

A Roth IRA is one of the two most common IRA types and offers tax-free investment growth. It’s available to many workers. But there are restrictions around its use, including income limits, meaning it may not be the right tool for everyone.

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What is a Roth IRA? 

A Roth IRA is an account that allows workers to save for retirement in a tax-advantaged way. The tax benefits differ from those of retirement accounts you may be more familiar with, such as traditional 401(k) plans.

“Unlike most retirement accounts that offer a tax deduction now in exchange for taxing growth later, Roth IRAs offer after-tax benefits,” said David Edmisten, a certified financial planner and the founder of Next Phase Financial Planning LLC.

When you contribute to a Roth IRA, you do so with after-tax money. There’s no tax deduction in the current year, which means it won’t save you money on taxes in the short term the way some other retirement plans will.

But once the money is in your account, you generally won’t pay taxes on it again. You’ll enjoy tax-free investment growth while the money is in the account and tax-free withdrawals during (and sometimes even before) retirement.

This means, if used correctly, all of your investment growth within a Roth IRA can be completely tax-free.

You can contribute up to $7,000 to an IRA in 2024, up from $6,500 in 2023. If you’re 50 or older, you can make a catch-up contribution of an additional $1,000 for a total contribution of $8,000.

There’s a catch, though: You can’t contribute more to your Roth IRA than you have in income. So if you earn only $4,000 in a given year, that’s the most you can contribute to your Roth IRA.

Tip: A spousal IRA allows an income-earning spouse to contribute to a non-income-earning spouse’s IRA.

Generally speaking, the money in your Roth IRA is designed to stay there until you turn 59½. Early withdrawals of your earnings may be subject to income taxes and a 10% penalty. 

There are exceptions to that rule, however. For instance, you can withdraw Roth IRA earnings tax- and penalty-free before age 59½ if your account has been open for at least five years and one of the following is true:

• You use the withdrawal (up to a $10,000) for a first-time home purchase.
• You are permanently and totally disabled.
• You are the beneficiary of the deceased original account owner.

 Tip: Because you’ve already paid taxes on your Roth IRA contributions, you can withdraw them — but not the earnings — anytime tax- and penalty-free.

Unlike 401(k)s and other workplace retirement plans, Roth IRAs are self-managed. You can open an account with any brokerage firm that offers them and then manage your own investments.

How does a Roth IRA work?

Now that you have a handle on the Roth IRA basics, let’s peel back another layer and see how these unique plans work.

After you open a Roth IRA with a brokerage firm, you must decide how to invest your money. You have a vast array of investment options at your fingertips with a Roth IRA, from individual stocks and bonds to mutual funds, ETFs and even real estate. 

Remember that experts generally recommend you build a diversified portfolio to balance risk and reward. What that looks depends on your financial goals, risk tolerance, time horizon and other factors.

In contrast to traditional IRAs, Roth IRAs offer another advantage: There’s no requirement to start withdrawing your money at age 73. It’s your retirement nest egg, and you have the freedom to let it grow undisturbed for as long as you wish.

A Roth IRA can also be a great way to pass down money to your heirs. But note that the rules regarding inherited Roth IRAs are complex and vary based on the account type and the relationship between the beneficiary and the original account owner.

All in all, a Roth IRA provides an adaptable, straightforward way to plan for retirement that doesn’t stop at your golden years. The benefits can extend to future generations too.

Roth IRA vs. traditional IRA

The traditional IRA comes with tax advantages that are different from those of a Roth IRA. Here’s how those tax advantages compare:

• Roth IRA: Contributions are made with after-tax money, meaning you don’t reduce your tax liability in the current year. You get tax-free investment growth and tax-free withdrawals during retirement.
• Traditional IRA: Contributions are made with pretax dollars, meaning you reduce your tax liability in the current year. You get tax-deferred investment growth and pay income taxes on withdrawals during retirement.

There are also similarities between Roth IRAs and traditional IRAs. Both are self-managed accounts that allow you to contribute up to $7,000, or $8,000 if you’re 50 or older, in 2024. You choose your own investments and won’t pay taxes on them as long as the money remains in the account.

Like Roth IRA earnings, traditional IRA earnings generally must remain in the account until you turn 59½. But unlike Roth IRA contributions, traditional IRA contributions can’t be withdrawn tax- or penalty-free, as they haven’t been taxed yet.

Roth IRA income limits

Roth IRAs have some powerful tax advantages, but they aren’t available to everyone. The IRS sets income limits on who can contribute to a Roth IRA. As long as your income remains under the lower limit, you can make a full contribution. If you make more than the upper limit, you won’t be able to contribute at all.

Roth IRA income limits for 2024

If you earn between the lower and upper limits, you can contribute some money to a Roth IRA. The amount you can contribute depends on where in that range your income falls.

Here’s how the IRS instructs you to calculate your Roth IRA contribution:

1. Take your modified AGI and subtract:
   • $230,000 if you’re filing a joint return or a qualifying widow(er).
   • $0 if you’re married filing a separate return and lived with your spouse during the year.
   • $146,000 for all other individuals.
2. Divide the results by:
   • $10,000 if you’re filing a joint return, a qualifying widow(er), or married filing a separate return and you lived with your spouse during the year.
   • $15,000 for all other individuals.
3. Multiply the results by the maximum Roth IRA contribution limit.
4. Subtract the results from the maximum Roth IRA contribution limit.

How much can I contribute to a Roth IRA if I’m a high earner?

The amount you can contribute to a Roth IRA hinges on your filing status and modified AGI. For 2024, if you’re married filing jointly and your AGI is between $230,000 and $239,999.99, you can make a reduced contribution. If your AGI is $240,000 or more, you aren’t eligible to contribute at all.

If you are a single filer with an AGI between $146,000 and $160,999.99, you can make a reduced contribution. But if your income crosses the $161,000 threshold, you can’t contribute. 

Keep in mind that the IRS adjusts these income limits periodically, so always refer to the current year’s guidelines.

Contributing through a backdoor Roth IRA

If your income prevents you from contributing directly to a Roth IRA, you may be able to take advantage of the account’s benefits through a backdoor Roth IRA.

To use a backdoor Roth IRA, follow these steps:

1. Make a nondeductible contribution to a traditional IRA.
2. Convert that money to a Roth IRA.

Do the conversion as soon as possible to minimize the chances of earnings accruing in the traditional IRA. If no earnings are moved with the nondeductible contribution, there should not be current-year tax implications.

What happens if you contribute too much?

You may find yourself in a situation where you contributed more to your Roth IRA than you were allowed to. These excess contributions generally trigger a 6% tax penalty each year until you correct the mistake.

“There are a few ways the IRS allows a taxpayer to remedy an overcontribution into a Roth IRA,” said Douglas Kuring, a certified financial planner and a financial advisor with Wealth Enhancement Group. “Each of these options has its advantages and disadvantages. It’s important to consider all options available to you so that you make the choice that’s in your best interest.”

Here are your options if you overcontributed to your Roth IRA:

• If you discover a mistake before you file your taxes, you can withdraw your excess contributions and their earnings. You can avoid the 6% penalty in this case.
• If you discover the mistake after you file your taxes, you can do one of two things:

1. Remove the excess amount within six months and file an amended tax return by the October extension deadline, avoiding the 6% penalty. 
2. Apply the excess amount to next year’s contribution, which reduces your contribution limit for that year, and pay the 6% penalty.

“It’s my recommendation that you consult with a knowledgeable financial advisor and tax professional to ensure the issue is properly remediated, any taxes or penalties owed are paid, and everything is documented in the event you are ever audited by the IRS in the future,” said Kuring.