Roth IRA 2018 Contribution Limit: Everything You Need to Know!

The Roth IRA is a popular retirement savings account that offers tax-free withdrawals in retirement. The annual contribution limit for 2018 is $5,500. If you're aged 50 or older, the catch-up contribution limit is an additional $1,000 for a total of $6,500.

Roth IRA 2018 Income Limits

To contribute to a Roth IRA in 2018, you must meet certain income requirements. The income limits are based on your filing status and vary depending on whether you're single or married filing jointly.

For 2018, the Roth IRA income limits are:

• Single taxpayers: The maximum income limit for eligible contributions is $120,000. The phase-out range for contributions is $120,000 - $135,000.
• Married couples filing jointly: The maximum income limit for eligible contributions is $189,000. The phase-out range for contributions is $189,000 - $199,000.
• Married couples filing separately: The phase-out range for contributions is $0 - $10,000.

Contribution Limits and Income Caps for Roth IRAs

Effective Strategies for Maximizing Roth IRA Contributions

1. Contribute early and often. The sooner you start contributing to your Roth IRA, the more time your money has to grow tax-free. Even if you can't afford to contribute the maximum amount, every little bit helps.
2. Take advantage of catch-up contributions. If you're aged 50 or older, you can make catch-up contributions of up to $1,000 per year. This is a great way to boost your retirement savings and make up for lost time.
3. Consider a Roth IRA conversion. If you have a traditional IRA, you can convert it to a Roth IRA. This allows you to pay taxes on your IRA balance now, but withdraw your money tax-free in retirement.
4. Roth IRAs for low earners. The IRS does not tax the first $12,000 of qualified Roth IRA distributions for low-income earners. This is known as the Roth "Saver's" Credit and could result in a valuable tax refund.

Tips and Tricks for Roth IRA Contributions

• Make automatic contributions to your Roth IRA. This makes it easy to save regularly and stay on track with your retirement goals.
• Use your tax refund to fund your Roth IRA. This is a great way to boost your savings and get a head start on retirement.
• Consider a Roth 401(k). If your employer offers a Roth 401(k), you can contribute after-tax dollars that will grow tax-free and be withdrawn tax-free in retirement.
• Don't overcontribute to your Roth IRA. If you contribute more than the annual limit, you'll be subject to a 6% penalty on the excess amount.

Common Mistakes to Avoid When Contributing to a Roth IRA

• Contributing too much. Be sure to check the income limits before contributing to a Roth IRA. If you contribute too much, you'll be subject to a 6% penalty on the excess amount.
• Taking withdrawals before retirement. Withdrawals from a Roth IRA before retirement are subject to income tax and a 10% penalty.
• Not contributing enough. The Roth IRA contribution limit is relatively low, so it's important to contribute as much as you can each year.
• Not investing your Roth IRA. Once you've made a Roth IRA contribution, it's important to invest it so that it can grow tax-free.

Frequently Asked Questions About Roth IRA Contributions

1. What is the maximum amount I can contribute to a Roth IRA in 2018? The maximum contribution limit for 2018 is $5,500. If you're aged 50 or older, the catch-up contribution limit is an additional $1,000 for a total of $6,500.
2. What are the income limits for Roth IRA contributions? The Roth IRA income limits vary depending on your filing status and are based on your modified adjusted gross income (MAGI).
3. Can I make Roth IRA contributions if I'm married and filing separately? Yes, but the income limits are very low. The phase-out range for contributions is $0 - $10,000.
4. What happens if I contribute too much to a Roth IRA? If you contribute more than the annual limit, you'll be subject to a 6% penalty on the excess amount.
5. Can I withdraw money from a Roth IRA before retirement? Yes, but withdrawals before retirement are subject to income tax and a 10% penalty.
6. What is the Roth IRA Saver's Credit? The Roth IRA Saver's Credit is a tax credit for low-income earners who contribute to a Roth IRA. The credit is worth up to $1,000 per year.
7. Should I consider a Roth IRA or a traditional IRA? The best type of IRA for you depends on your individual circumstances. If you expect to be in a higher tax bracket in retirement, a Roth IRA may be a better option. If you expect to be in a lower tax bracket in retirement, a traditional IRA may be a better option.
8. How do I invest my Roth IRA? Once you've made a Roth IRA contribution, it's important to invest it so that it can grow tax-free. You can invest your Roth IRA in a variety of assets, including stocks, bonds, and mutual funds.