2024 Roth IRA Contribution Limits: To Contribute or Convert? Stretch Your Retirement Savings


By: Troy Sharpe CFP®, CPWA®, CTS®, Founder and CEO
Updated: February 15, 2024
Reviewed by: Nathan Kattner


New Year 2024. This means we have new Roth IRA contribution limits. Now don’t confuse contribution limits with Roth IRA conversions. Two completely different things we’re going to talk about. The reason you should understand Roth IRA contributions is this could be hundreds of thousands of dollars of tax-free money for you and your family in retirement.

First, I want to clear up some confusion that we often hear from clients or prospective clients about the difference between contributions and conversions. Oftentimes when we’re doing a tax plan and we’re converting money to a Roth IRA, a client will say, “Well, Troy, I make too much money for that. My income is above the limits.” We’ll have to explain that those limits only apply to Roth contributions, not Roth conversions.

The difference between Contributing and Converting to a Roth IRA Savings

A contribution is when you take earned income, you have to be working to make a Roth IRA contribution. You take it from your bank, your savings account, and you contribute it to a Roth IRA. A conversion is when we take money from an already established retirement account, like an IRA, and we move it into a Roth IRA. There are no income limits, meaning you can make as much money as you want. There is no limitation on the amount that you can convert, unlike Roth IRA contributions.

We’re going to go through the limits now but very important to understand the distinction between a conversion, where we’re moving money from an IRA to a Roth, and a contribution, where we’re taking money from our paycheck that typically goes into a bank, then goes into a Roth IRA. Even professionals sometimes can confuse the difference between Roth IRA contributions and Roth IRA conversions. I had a CPA call me up one time and he was irate because he thought we made this big mistake for a mutual client that we shared.

What we did was we moved a couple hundred thousand dollars from this client’s IRA to his Roth IRA. The situation made a lot of sense. We felt he was going to potentially save a lot of taxes down the road. He was in a lower tax bracket now but was expecting to make a lot more money as the years progressed. Long story short, the CPA was like, “Troy, my client may have penalties now. He’s taking the money out prior to $59.50. He has all these taxes, and he’s ineligible because he makes too much money.”

I had to calm the CPA down and simply explain that this wasn’t a Roth IRA contribution. What we’re doing was a conversion. Then with Roth conversions, IRA conversions, there is not an income limit or a conversion limit. It’s very easy for people to confuse the two, and that’s why I wanted to spend a couple minutes just going through the difference between Roth IRA contributions and Roth IRA conversions.

For those of you who already have a lot of money inside your IRA and want to learn about Roth IRA conversions, moving money to that Roth IRA from your IRA, and the benefit for you in your retirement, we did a great video called The Roth IRA Conversion Ladder about a month ago. It’s already at 130,000 views with a lot of great comments. If you want to learn more, that’s a good video to go to and learn about how it could potentially benefit you in your retirement. If you qualify for Roth IRA contributions, just go ahead and set up that ACH from your employer into that Roth IRA. Pay yourself first, make sure the money gets into that Roth IRA.

Navigating Income Limits: Eligibility Criteria

Okay, if you’re a single tax filer and you make less than $146,000 in 2024, you can contribute to a Roth IRA. If you make between $146,000 and $161,000, technically $160,999, you’re in what’s called the phase-out range. You can make a contribution, but it’s a reduced amount. It’s a complex calculation. You can find that on the internet. If you make over $161,000, you are not eligible to contribute to a Roth IRA, at least not through what we call the front door. There is a backdoor strategy you could potentially research, but through the front door, these are your income limits for Roth IRA contributions if you’re a single tax filer.

If you are a married tax filer, $230,000 is your income limit. If you have less than that, you can make a full contribution into a Roth IRA. Between $230,000 to $240,000, you’re in the phase-out range and you can make a reduced contribution. If you make more than $240,000 of modified adjusted gross income, you are no longer eligible to make a Roth contribution. Again, that’s through the front door. I’ll talk briefly about the backdoor towards the end of this video.

Now that you understand how much income you can earn before being ineligible to contribute to a Roth IRA, again, not a conversion, a contribution, it’s important to understand what your contribution limits are, and those are based on your age. If you’re less than 50 years old, you can contribute $7,000 per spouse. If you’re 50 years old or older, you can do what’s called a $1,000 catch-up contribution. $1,000 catch-up plus the $7,000 base limit is $8,000 per year per spouse.

Now these typically go up. Last year it was $6,500 with $1,000 catch-up. $8,000 total for 2024 if you’re over the age of 50 or older into a Roth IRA. It could be $16,000 if you’re over 50, you can contribute to a Roth IRA. Both spouses do not have to be working, but one spouse does have to be working because you have to have earned income to contribute to a Roth IRA. You do not have to be working or have earned income to do a Roth conversion. You can be completely retired, have no earned income, wages, et cetera., and still do a Roth conversion.

Roth Contribution Calculator

I want to show you a calculation for whether you’re single or married of the power of the Roth IRA contribution strategy over time. This could possibly be for you, maybe you have a child or a grandchild, I want to show you the power of the Roth IRA strategy. Here we have a payment of $7,000, so someone who’s younger than 50 contributing for 20 years into their Roth IRA from their bank account, earning an average of 8%. That turns into $320,000 from just making $7,000 annual payment. If you have a spouse, you’re making $14,000 Roth IRA contributions, two people, so you can double the contribution over 20 years at 8%, turns into $640,000.

I mentioned modified adjusted gross income earlier, and that’s an important term because that’s the number that’s used to determine if you qualify or if you’re eligible to make a Roth IRA contribution. Again, it doesn’t matter for Roth IRA conversions. Gross income is how we do this calculation. We start with gross income, so that’s all income that’s earned, whether it’s from working, it’s from investing, it’s from real estate. All of your income combined is your gross income.

Then we have certain, what we call above-the-line deductions. One half of self-employment tax, if you’re self-employed, health insurance premiums, retirement account contributions, HSA contributions, these are all deductions that you can take that reduce your gross income. They’re called above-the-line deductions. Once you subtract those out, now you’re at adjusted gross income.

Unfortunately, the IRS makes you add back most of those deductions. Now, the Internal Revenue Code is pretty complex, and you would think there would be one definition for modified adjusted gross income, but unfortunately, there are several. If you’re looking at calculating a possible subsidy for your health insurance premiums, if you are already in retirement and you’re on Medicare and your income is too high, you may be subject to what’s called IRMAA, an income-related monthly adjustment amount, and that’s a different calculation for modified adjusted gross income.

I just want to generally educate you here. With Roth IRA contributions, it’s subject to modified adjusted gross income, and we have to add back most of these deductions, but if you’re on the tipping point here of $146,000 of income if you’re single, or $230,000 of income if you’re married, filing jointly, you probably want to work with a CPA to make sure you get this number correct, your MAGI. You add those above-the-line deductions back in, most of them, and that gets you to your modified adjusted gross income. That’s the number that you use to determine if you’re eligible for a Roth IRA contribution.

Then for any of you tax nerds out there, if we want to take this a step further, it always helps to see this multiple times because the tax code, again, it does get confusing, but AGI is your adjusted gross income. You then subtract your standard deduction from that to get to your taxable income, and this is the amount of money that determines what tax bracket you’re in, what rate you’re paying income taxes, and modified adjusted gross income doesn’t matter for this calculation. A little bonus material for those of you that do do your own taxes or are starting to learn about tax planning, it always helps to see this because once you start to piece it together, eventually it starts to make sense of how the tax code works.

Exploring Backdoor Roth IRA Strategies

One quick bonus item for you. If you make more income than the threshold limits we discussed previously, there is a concept called the Backdoor Roth IRA. The basic premise is you put money into a traditional IRA, but because your income is too high, you don’t get a tax deduction for it. That’s called a non-deductible contribution to a traditional IRA. Then at some point in the future, you move that money from your IRA over to your Roth IRA. That is a conversion.

Now, because you’ve put it in there and not paid taxes on it originally, there is no tax on that conversion. But there are a whole host of rules that you need to be aware of. The IRS actually has not yet ruled on whether this is legal or not, but there’s a ton of information on the internet. Thousands and thousands of people do this all the time. I’m not endorsing it, I’m not advising that you do it, but it is something that a lot of people do. You may want to do some research on and see if it’s right, possibly for your situation, if you’re over those income limits.


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