Saving for retirement can be more effective when you understand the contribution limits and rules that apply to your accounts. Each year, the IRS may adjust IRA contribution limits based on inflation and policy updates. Staying informed helps you maximize the benefits of tax-advantaged savings while avoiding penalties. Here’s what to know about IRA contribution limits this year and how they may impact your retirement strategy.

Current IRA Contribution Limits

For this year, the contribution limits are:

  • $6,500 if you’re under age 50
  • $7,500 if you’re age 50 or older (includes a $1,000 catch-up contribution)

These limits apply across all your IRAs combined. For example, if you contribute $3,000 to a Roth IRA, you can contribute up to $3,500 more to a Traditional IRA if you’re under 50.

Income Limits for Roth IRA Contributions

Roth IRAs have income eligibility rules that determine whether you can contribute directly. For this year:

✅ Single filers: Phase-out range begins at a modified adjusted gross income (MAGI) of $138,000 and ends at $153,000.

✅ Married filing jointly: Phase-out range begins at $218,000 and ends at $228,000.

If your income exceeds the phase-out range, direct contributions to a Roth IRA aren’t allowed. However, you may still be able to fund a Roth IRA through a strategy known as a backdoor Roth IRA.

Deductibility of Traditional IRA Contributions

You can contribute to a Traditional IRA regardless of income, but whether your contribution is tax-deductible depends on your income and whether you (or your spouse) participate in a retirement plan at work.

✅ Single filers covered by a workplace plan: Deduction phases out between $73,000 and $83,000 MAGI.

✅ Married filing jointly (covered spouse): Deduction phases out between $116,000 and $136,000 MAGI.

If neither spouse participates in a workplace retirement plan, contributions are fully deductible regardless of income. Contributions above these thresholds remain non-deductible but still benefit from tax-deferred growth.

Catch-Up Contributions for Those Age 50+

If you’re 50 or older, you can contribute an additional $1,000, increasing your limit to $7,500. This catch-up provision provides an opportunity to boost retirement savings as you approach retirement age.

IRA Contribution Deadline

You can contribute to an IRA for the current tax year up until the tax filing deadline in April of the following year. For example, contributions for this year can be made up until April 15th of next year. This deadline gives flexibility to make last-minute contributions that may also affect your tax situation for the year, depending on eligibility.

Why Contributing Matters

Making regular contributions to your IRA supports long-term retirement savings. Benefits may include:

  • Tax-deferred growth in a Traditional IRA
  • Tax-free growth and qualified withdrawals in a Roth IRA
  • Potential for compound growth over time

Even modest contributions, made consistently, can accumulate into meaningful savings over the years.

Strategies If You Exceed Roth IRA Income Limits

If your income exceeds the limits for direct Roth IRA contributions, alternatives to consider include:

  • Backdoor Roth IRA strategy: Contribute to a non-deductible Traditional IRA and convert it to a Roth IRA. (Consult a tax professional to understand potential implications.)
  • Employer-sponsored Roth 401(k): Contributions to a Roth 401(k) aren’t subject to income limits.

Conclusion

Understanding IRA contribution limits and eligibility rules each year helps you make informed decisions about your retirement savings. Whether maximizing contributions for tax-deferred growth or managing income thresholds for Roth eligibility, keeping up with annual updates can enhance your retirement strategy. Working with a financial professional can provide personalized guidance tailored to your situation.

FAQ

Can I contribute to both a Traditional IRA and a Roth IRA in the same year?

Yes, but your combined contributions can’t exceed the annual limit of $6,500 (or $7,500 if age 50+).

What happens if I contribute more than the limit?

Excess contributions may be subject to a 6% penalty for each year they remain in the account. You can avoid the penalty by withdrawing the excess (and any earnings) before the tax filing deadline.

Can I contribute to an IRA if I also contribute to a 401(k)?

Yes. However, if you or your spouse participate in a workplace retirement plan, your ability to deduct Traditional IRA contributions may be limited based on income.

Are IRA contribution limits the same for everyone?

The contribution amount is the same, but eligibility for Roth contributions and deduction of Traditional IRA contributions may vary based on income and plan participation.

Do IRA contribution limits increase every year?

The IRS reviews contribution limits annually and may adjust them for inflation, although changes don’t occur every year.

Disclaimer: This is not intended to offer or deliver investment advice in any way. Different types of investments involve varying degrees of risk. BML Wealth Management is not qualified to render any legal or accounting advice. Please contact us for further information on our services.