How Much Money to Save When I Enroll in a Roth IRA?

It may be hard to think about retirement when you're young, but the earlier you start saving, the more you can save. Individual retirement accounts (IRAs) offer a tax-advantaged way to save for retirement. With a Roth IRA, you don't get a tax deduction for your contributions like with a traditional IRA, but your withdrawals are tax-free in retirement. How much money you should save depends on your own income as well as government regulations.

The Maximum

As of 2013, you can contribute up to $5,500 a year in a Roth IRA, or any kind of IRA. Also, once you turn 50, you can put an additional $1,000 a year into your Roth IRA. Contribution limits are cumulative, so even if you have more than one IRA, your maximum contribution level is $5,500. If you're married, you and your spouse can each contribute $5,500 to a Roth IRA.

Earned Income

Whatever amount you choose to put in a Roth IRA, it must come from earned income. This includes wages, bonuses, tips, income from rental property, self-employment income and long-term disability benefits, among other sources. Interest and dividends from investments, pension payments, alimony, child support and unemployment benefits do not count as earned income. If your earned income is lower than the maximum Roth IRA contribution limit, then whatever your income is, is your contribution limit. The one exception to the earned income rule is what's called a spousal IRA. If your spouse doesn't work, he can open and fund a Roth IRA using your income, as long as you make enough to cover the contribution to both accounts.

Income Limits

There is an income limit for contributing to a Roth IRA, meaning if you make too much money, you may not be able to open a Roth account. For 2013, a single person can make $112,000 and still be able to fully fund a Roth IRA. For married couples, the maximum income is $178,000. Single people with incomes up to $127,000 a year and married couples with incomes up to $188,000 a year can make reduced contributions to a Roth.


It might not be practical for you to contribute the maximum to a Roth IRA. When you are young and just starting out, other expenses may take precedence. However, it's a good idea to start investing for your retirement as early as possible, because it gives your nest egg more time to grow. One big advantage to a Roth IRA is that you can withdraw your contributions if you need to, because you have already paid taxes on the money. And don't be discouraged if you can't contribute the maximum: Even if you contribute $1,000 or less a year, the money adds up quickly.