The initial amount of money you have in your Roth IRA account. This could be from previous contributions or transfers from other retirement accounts.
2. Expected rate of return
The annual percentage gain you expect your investments to earn. This rate can vary based on market conditions and the types of investments you choose.
3. Marital status
Your marital status can influence your contribution limits and tax benefits. Different filing statuses have different income thresholds and contribution limits.
4. Your age
Your current age is a significant factor in retirement planning. The younger you start, the more time your investments have to grow
5. Age you want to retire at
This is the age when you plan to start withdrawing funds from your Roth IRA.
6. Marginal tax rate
The tax rate you pay on each additional dollar of income. This rate helps estimate the tax savings from Roth IRA contributions, as contributions are made with after-tax dollars.
7. Income and annual contribution limits
For 2025, the total annual contribution limits for an IRA are $7,000 with an additional $1,000 catch-up contribution limit for those who are age 50 or over, for a total of $8,000.
These contributions are the total contributions to all types of IRA accounts for the year.
Your income limits the ability to contribute to a Roth IRA account. The income and contribution limits for 2025 are:
| Tax Filing Status | Modified Adjusted Gross Income (MAGI) | Roth IRA contribution limit for 2025 |
|---|---|---|
| Single, married filing jointly, but didn’t live with your spouse during the year or head of household | Less than $150,000 | Full amount (up to $7,000 plus any catch-up contributions) |
| More than $150,000 but less than $165,000 | Partial contribution, prorated | |
| $165,000 or more | No contributions allowed | |
| Married filing jointly, eligible surviving spouses | Less than $236,000 | Full amount (up to $7,000 plus any catch-up contributions) |
| More than $236,000 but less than $246,000 | Partial contribution, prorated | |
| $246,000 or more | No contributions allowed | |
| Married filing separately (and you lived with your spouse at any point during the year | Less than $10,000 | Particle contribution based on income |
| $10,000 or more | No contributions allowed |
For reference, the income and contribution limits for 2024 were:
| Tax filing status | Modified adjusted gross income (MAGI) | Roth IRA contribution limit for 2024 |
|---|---|---|
| Single, married filing jointly, but didn’t live with your spouse during the year or head of household | Less than $146,000 | $7,000 ($8,000 if 50 or older) |
| $146,000 or more, but less than $161,000 | Contribution is reduced | |
| $161,000 or more | No contribution allowed | |
| Married filing jointly, eligible surviving spouses | Less than $230,000 | $7,000 ($8,000 if 50 or older) |
| $230,000 or more, but less than $240,000 | Contribution is reduced | |
| $240,000 or more | No contribution allowed | |
| Married filing separately (and you lived with your spouse at any point during the year | Less than $10,000 | Contribution is reduced |
| $10,000 or more | No contribution allowed |
8. Maximize contributions
To fully utilize the benefits of a Roth IRA, it's advisable to contribute the maximum allowable amount each year.
9. Roth IRA balance at retirement
This is the total amount you will have in your Roth IRA at retirement, based on your contributions and expected rate of return.
10. Standard taxable account
An alternative to a Roth IRA where your investments are subject to taxes on dividends, interest, and capital gains.
11. Contributions
The amounts you add to your Roth IRA account each year. These contributions are made with after-tax income, allowing tax-free withdrawals in retirement.
12. Tax savings
One of the primary benefits of a Roth IRA is the tax savings on your investment earnings, which can be withdrawn tax-free in retirement.
Additional Roth options
Beyond making a direct contribution to a Roth IRA account, there are some other ways to fund a Roth account.
Here are some other options to consider.
Roth IRA conversion
A Roth IRA conversion entails moving money from a traditional IRA or other pre-tax retirement plan, such as a 401(k) to a Roth IRA.
Generally, the amount converted will be subject to ordinary income taxes in the year of the conversion.
The advantage is that the money converted will later be eligible for tax-free withdrawals, assuming certain requirements are met.
Whether a Roth conversion makes sense will depend upon your own unique situation.
Often, it can make sense to do a conversion in a year when you are in a lower tax bracket to help plan for future years when you might be in a higher tax bracket.
Backdoor Roth IRA conversion
A backdoor Roth IRA conversion generally involves making an after-tax contribution to a traditional IRA account and then converting that amount to a Roth IRA.
The conversion will be taxable based on the pro-rata rule that takes the total amount that you have in traditional IRA and related accounts, such as a SEP-IRA, and looks at the percentage of that balance that is pre-tax money versus money contributed on an after-tax basis.
Both the Roth IRA conversion and the backdoor Roth conversion are ways to add to a Roth IRA account for those who do not qualify for a direct Roth IRA contribution due to their income level for the year.
It’s important to have the money needed to pay any taxes on these conversions available outside of the IRA account.
Paying the taxes with money from the account to be converted can become very costly.
Contribute to a Roth 401(k) or other Roth employer-sponsored retirement plan
Many employer-sponsored retirement plans offer a Roth option within their plan. This can include a 401(k), 403(b), 457, or other type of plan.
The plan contribution limits are generally higher than for an IRA, allowing you to contribute up to the annual limits for the plan to the Roth option in the plan.
For example, for 2025, the 401(k) contribution limit is $23,500 with an extra $7,500 in catch-up contributions available for those who are age 50 or over.
This limit covers combined total plan contributions for the year, whether made to a traditional or Roth account in any combination.
For those who are self-employed, the ability to contribute to a Roth account can also apply. This might include a solo 401(k), SEP-IRA or other type of account.
Roth accounts and taxes
One of the biggest advantages of a Roth account is the ability to make tax-free withdrawals, conceivably in retirement.
This is generally true, but it's important to understand how taxes and Roth accounts work.
Direct contributions to a Roth IRA or any other type of Roth account, such as a Roth 401(k), are made on an after-tax basis. Unlike with a traditional IRA or 401(k), there are no current year tax breaks.
Contributions to a Roth IRA can be withdrawn tax-free at any time.
This is not the case with earnings that have accumulated in the account. In this case, you generally must be at least 59 ½ and the initial contribution to the account must have been made at least five years ago.
Each Roth conversion has its own five-year timeline. There are some exceptions to these rules for situations such as death, disability and others.
Roth IRA alternatives
If you're ineligible to contribute to a Roth IRA or want to explore other options, consider these alternatives:
- Traditional IRA: Contributions may be tax-deductible, and earnings grow tax-deferred.
- 401(k) or 403(b): Employer-sponsored plans with higher contribution limits and potential employer matching. How to roll over your 401(k) to IRA? >
- Health Savings Account (HSA): Offers tax advantages for medical expenses and can be used as a supplemental retirement account.
- Taxable investment account: No contribution limits, but investments are subject to taxes on earnings.
Is a Roth account right for me?
Whether or not a Roth IRA or other type of Roth account is right for you depends on your situation.
There are many factors to consider, both as part of your current situation and your expected situation in retirement.
It makes sense to review the question of whether a Roth option is right for you with a qualified financial advisor as part of your overall financial planning.