Roth IRA Limits Are Increasing in 2023 — Can You Contribute?

(Charlene Rhinehart, CPA)

Last month, the IRS announced new Roth IRA (individual retirement account) contribution limits for 2023. For the first time in several years, the contribution cap exceeds $6,000 for people under 50. This is great news for people who want to stash away more money in a retirement account and receive tax-free income during retirement.

We’ve summarized the new contribution and income limits below so you can plan ahead for 2023. Before you add money to a Roth IRA, make sure you qualify.

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Roth IRA contribution limits increase in 2023

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You can save more money in a Roth IRA thanks to new inflation-adjusted contribution limits for 2023. For the first time since 2019, the annual Roth IRA contribution limit is going up. Savers under 50 can contribute up to $6,500 to a Roth IRA in 2023. That’s a $500 increase over the contribution limit for 2022. If you end up earning less than the annual contribution limit, your contribution amount is limited to your earned income.

Since Roth IRAs have no age limits, children can contribute to Roth IRAs if they have income. Let’s say your child has a summer job offer in 2023. He can deposit money into the account when he starts receiving a salary. You can also contribute money to a Roth IRA on your child’s behalf as long as the contribution amount does not exceed your child’s earned income.

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Let’s say your child earns $10,000 over the summer. You can hide up to $6,500 in your child’s Roth IRA, up from $6,000 in 2022. On the other hand, if your child earned only $4,000, the maximum amount of money that can go into a Roth IRA in 2023 is limited is at $4,000. An early start will give your child a head start. Time will give them a better chance of building a million dollar nest egg without playing the lottery.

If you’re 50 and older, it’s not too late to contribute to a Roth IRA. In fact, there is a bonus for matching contributions with your name on them. You can contribute an additional $1,000 to your Roth IRA, increasing the contribution limit to $7,500. The compensation contribution is not adjusted for inflation.

Check your income to see if you qualify

Along with raising the contribution limits for Roth IRAs, the IRS also announced an increase in income ranges. That means more people will be able to contribute to a Roth IRA in 2023. If your income barred you from the Roth IRA club in 2022, you’ll have a better chance to stash away money in 2023 thanks to the new restrictions.

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Let’s say your tax status is married. The income limit for a full Roth IRA contribution in 2023 is $218,000, up from $204,000 in 2022. Once your income climbs above the income limit, you’ll enter the phase-out range. Your maximum contribution limit will then be reduced. You’re not allowed to contribute any money to a Roth IRA when your income exceeds $228,000, up from $214,000 in 2022.

Focus on your modified adjusted gross income (MAGI) to determine if you qualify to contribute to a Roth IRA. See the 2023 income limits below.

STATUS OF TAX RETURN 2023

INCOME LIMIT FOR FULL ROTH IRA CONTRIBUTION

THE ROTH CONTRIBUTION IS COMPLETELY TERMINATED DUE TO THE ABOVE MENTIONED INCOME

Single and head of household

138,000 dollars

153,000 dollars

Married filing jointly

218,000 dollars

228,000 dollars

Take advantage of your Roth IRA contributions in 2023

The new Roth IRA contribution limits are better than ever. You can contribute an additional $500 to your account in 2023 if you’re under 50. But if you’re 50 and older, you can enjoy a $7,500 contribution limit.

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While contribution limits are attractive, it’s important to check the box on the requirements before adding money to a Roth IRA. Make sure you have earned income and that your income does not exceed the limits. Once you check the box on all the requirements, you’ll be one step closer to generating more tax-free retirement income.

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