December 07, 2023
You can contribute more to an IRA next year. And I hope you will.
For 2024, the maximum contribution is $7,000 if you are younger than age 50. That’s a $500 increase from this year’s maximum. If you are at least 50 years old, your 2024 maximum contribution is $8,000. That’s a $500 increase as well over this year’s limits.
I hope you will make it a goal to save up to your 2024 limit. And you know that I think it’s smart to save in a Roth IRA because when you retire, all your withdrawals will be 100% tax-free.
Your income has to be below a certain level to be able to contribute the full amount to a Roth IRA. For 2024, an individual with modified adjusted gross income below $146,000 and anyone who is married and files a joint tax return with modified income below $230,000 can contribute the full amounts.
If you don’t typically contribute up to the maximum, I hope you will consider pushing yourself to increase your retirement savings for 2024. I know saving more for tomorrow leaves you with less to spend today. And if that is impossible, I respect that. But I ask you to carefully and honestly assess whether it might be possible. Just think what that will mean to you in retirement.
Granted, those big numbers—$7,000, $8,000—can seem unobtainable. The trick is to break it down into more manageable bites:
If you are younger than 50, contributing $7,000 in 2024 works out to:
If you are at least 50 years old, contributing $8,000 in 2024 works out to:
It’s often easier to tackle a savings goal once you convert it to smaller amounts. It’s also a great way to stay motivated: every month, week, or day you hit your savings goal, you should do a little dance, or share the news with someone. Lots of someones. Because milestones deserve to be celebrated. And when we feel good about what we’ve accomplished it motivates us to keep at it.
Now, as for where to come up with the money. Take a fresh tour through your monthly spending to see if you could find ways to come up with the extra money you need to save the max in your 2024 Roth. Don’t necessarily look for one big savings; maybe there are three to five different expenses you could cut or trim to get you to your goal.
You could also decide right now that any tax refund goes toward your 2024 Roth IRA. The average refund is around $2,000 or so. That’s a serious chunk of money to get you closer to your 2024 goal of funding a Roth IRA to the max.