A Roth IRA allows you to contribute after-tax income to a retirement plan account in which earnings grow tax-deferred until distributions are made. Unlike a traditional IRA or 401(k) account that has mandated withdrawal requirements above a certain age, a Roth IRA can be invested without any distribution requirements during your retirement years.
The reason the IRS imposes no mandatory distribution limits is that they are paid upfront when you contribute to your Roth IRA whereas contributions to a traditional IRA or 401(k) are made with pre-tax dollars, so the IRS wants to get paid when you reach retirement.
Roth IRA tax advantages are so attractive that eligibility rules and limits are imposed by the IRS. As you earn ever more income, the amount you can contribute to a Roth IRA diminishes until you are prohibited from contributing altogether.
The tables below lists the income and contribution limits for a Roth IRA.
Roth IRA Income Limits 2017: Single, Married (filing separately)
For those filing tax returns in the categories single, married but filing separately or head of household, the maximum contribution is $5,500 annually when modified adjusted gross income is below $118,000. Above $133,000, contributions to a Roth IRA are ineligible and, between $118,000 and $132,999, a reduced contribution amount is permitted.
The benchmark for determining how much you can contribute to a Roth IRA is your modified adjusted gross income. Up to $118,000, the maximum contribution of $5,500 may be made by individuals with a single filing status, as well as those who are married but filing separately, and head of households.
When modified adjusted gross income increases above $118,000 but remains below $132,999, a reduced contribution is permitted. Above $133,000, contributions to a Roth IRA are deemed ineligible.
For those over the age of 50, an additional $1,000 catch-up is permitted, which leads to a total contribution of $6,500 annually.
| Filing As: | Max Contribution | Modified AGI |
| Individual; Married (filing separately if you did not live with your spouse during the year at any time); or Head of household |
$5,500 ($6,500 if over age 50) |
< $118,000 |
| Lower contribution | $118,000 → $132,999 | |
| Ineligible | > $133,000 |
Roth IRA Income Limits 2017: Married (filing jointly)
For married couples filing jointly, the maximum contribution amount is $5,500 when modified adjusted gross income falls below $186,000. From $186,000 up to $195,999, a reduced contribution is permitted. Contributions are ineligible for modified adjusted gross income amounts that exceed $196,000.
If you file jointly as a married couple, you are permitted to contribute at most $5,500 provided your modified adjusted gross income is below $186,000. If over 50, an additional $1,000 contribution is allowed for a total of $6,500.
A reduced contribution is allowed for couples with a modified AGI between $186,000 and $195,999 and above $196,000 contributions are ineligible.
| Filing As: | Max Contribution | Modified AGI |
| Married (filing jointly); or qualifying widow(er) | $5,500 ($6,500 if over age 50) |
< $186,000 |
| Lower contribution | $186,000 → $195,999 | |
| Ineligible | > $196,000 |
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Roth IRA Income Limits 2017: Married (filing separately)
For married couples filing separately who have lived together at any time during the year, contributions are heavily restricted – modified adjusted gross income greater than $10,000 renders you ineligible to contribute while contributions are reduced for amounts under $10,000.
Married couples filing separately who have lived with a spouse at any time during the year with modified AGI of $10,000 or more are ineligible to contribute while those with modified AGI below $10,000 are restricted in how much they can contribute.
You are not permitted to contribute more than you earn in any case. So if you and your spouse both contribute to a Roth IRA, the total contribution must be lower than your combined taxable compensation.
| Filing As: | Max Contribution | Modified AGI |
| Married (filing separately if you lived with your spouse during the year at any time) | Contribution lowered | < $10,000 |
| Ineligible | $10,000 or more |
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Can I Open A Roth IRA If My Income Is Too High?
If your income exceeds threshold contribution levels rendering you ineligible to contribute to a Roth IRA, you can elect to convert a traditional IRA to a backdoor Roth IRA, thereby still enjoying the tax advantages of the Roth IRA – provided you pay taxes on previously deducted contributions.
If your earned income exceeds threshold limits in place, you may still be able to take advantage of Roth IRA tax benefits. By converting a traditional IRA to a backdoor Roth IRA, you can still take advantage of tax-deferred growth of contributions and tax-free distributions upon reaching retirement.
The catch is that when you convert an account from a traditional IRA to a Roth IRA, you will need to pay taxes on contributions that had previously been deducted.
How To Get Into A Lower Tax Bracket In Retirement
By contributing to a Roth IRA, Medicaid premium payments may be lower and social security payments may be higher in retirement years if you fall into a lower tax bracket (because withdrawals from your Roth IRA are free from taxation).
In your retirement years, when you withdraw money from your Roth IRA, that money is tax-free, which means you can potentially end up in a lower income tax bracket than would otherwise be the case if the income from your Roth IRA had been subject to taxation.
The benefits multiply when you factor in that your social security payments may be higher because your taxes on social security income ends up lower. As income level increases, premiums paid on Medicaid increase too.
So by contributing to your Roth IRA, even if you are ineligible to contribute the maximum amount based on your income level, you can still potentially enjoy upon retirement:
- A higher share of your social security payments
- A lower Medicaid premium payment
- Tax-free income on contributions
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