What to Do After Maxing Out Your Roth IRA Contributions

Where to Invest Once You’ve Hit the Roth IRA Contribution Limit

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A Roth individual retirement account (IRA) offers some amazing tax benefits when you invest for retirement. Although you can’t deduct your contributions, you get both tax-free growth and tax-free withdrawals when you retire. The downside is that the contribution limits are relatively low. The maximum contribution in 2022 is $6,000, or $7,000 if you’re age 50 or older.

But if you’ve hit the Roth IRA contribution limits and still have cash earmarked for retirement savings, there are plenty of other ways to invest it. Let’s explore what to do after maxing out your Roth IRA contributions.

Key Takeaways

  • The Roth IRA contribution limit for 2022 is $6,000 if you’re younger than age 50 or $7,000 if you’re 50 or older.
  • While maxing out your Roth IRA contribution is a good goal, investing enough to get your employer’s full retirement match should take precedence.
  • You have until Tax Day to max out your Roth IRA for the previous year. For example, the deadline for making your 2021 Roth IRA contribution was April 18, 2022.

Roth IRA Contribution Limits

The maximum IRA contribution in 2022 is $6,000 for people younger than age 50. If you’re 50 or older, you can make an additional $1,000 catch-up contribution.

Note

These are combined contribution limits for Roth IRAs and traditional IRAs. For example, if you’re 42 and have a Roth and traditional IRA, you can contribute up to a total of $6,000 between the two accounts.

Once your income hits a certain threshold, the amount you can contribute to a Roth IRA starts to phase out. If your modified adjusted gross income (MAGI) exceeds the Roth IRA income limits, you’re ineligible to contribute. Here’s how it breaks down:

Filing Status 2022 Modified Adjusted Gross Income (MAGI) Maximum Contribution
Single, head of household, or married filing separately and didn’t live with spouse during tax year Less than $129,000 Up to the limit
  $129,000 or more but less than $144,000 Reduced amount
  $144,000 or more $0
Married filing jointly or qualifying widow(er) Less than $204,000 Up to the limit
  $204,000 or more but less than $214,000 Reduced amount
  $214,000 or more $0
Married filing separately and lived with spouse at some point in tax year Less than $10,000 Reduced amount
  $10,000 or more $0

For example, suppose you’re a 37-year-old single filer with a MAGI of $125,000. You could contribute the full $6,000 to your Roth IRA. However, if your income rose to $135,000, based on the Roth IRA rules, you’d be limited to contributing a phased-out amount of $2,400. However, since you’re still eligible to contribute a combined $6,000 to IRAs for the year, you could put the remaining $3,600 in a traditional IRA.

Note

You can’t contribute more than your taxable compensation in any year. So if you only earn $4,000 in 2022, your maximum Roth IRA contribution would be $4,000.

Where to Invest After You Max Out Your Roth IRA

You have several choices for investing once you’ve maxed out your Roth IRA. But if you have a workplace retirement plan such as a 401(k) or 403(b), consider contributing enough to get your full employer match before you fund a Roth IRA. Otherwise, you’re passing on free money.

You may also choose to save toward non-retirement goals, like a down payment on a house or a 529 plan for your child’s education. But if you want to invest more in retirement savings after maxing out your Roth IRA contribution, here are some options.

And yes, you can contribute to both a Roth IRA and Roth 401(k) or 403(b) if you meet the income limits.

Invest in a Spousal IRA

If your spouse doesn’t have taxable income and you file a joint tax return, you can fund a spousal IRA on their behalf. A spousal IRA can be a Roth or traditional IRA. The contribution limits are the same, so if you’re both younger than 50, the maximum contribution is $12,000 combined.

Top Off Your 401(k) or 403(b)

If you contributed enough to get your company 401(k) or 403(b) plan match before maxing out your Roth IRA, consider circling back to contribute unmatched funds. In 2022, you can contribute up to $20,500 to a 401(k) or a 403(b), provided your contribution doesn’t exceed your salary. If you’re older than age 50, you can make an extra $6,500 catch-up contribution if your plan allows it.

Make After-Tax Contributions to Your Company Plan

More than 86% of 401(k) plans now offer a Roth option that allows employees to invest after-tax dollars, according to the Plan Sponsor Council of America. If you have this option, you can max out your 401(k) or 403(b) and get the same tax-free growth you get with a Roth IRA. However, if your employer matches part of your contribution, the match will always be made pre-tax.

Invest in Taxable Non-Retirement Accounts

If you’ve maxed out your Roth IRA and workplace account, or you want the flexibility to withdraw your money whenever you'd like, consider a taxable investment account. These accounts have no annual limits or early withdrawal penalties. You’ll owe taxes on your gains, but you can minimize the bill if you hold securities for more than a year to lock in lower long-term capital gains rates.

Note

If you’re self-employed, you can save tax-deferred money through a self-employed retirement plan such as a Simplified Employee Pension (SEP IRA) or solo 401(k).

The Bottom Line

Maxing out your Roth IRA contribution for the tax year is a smart move since you can lock in a tax-free source of income in retirement. But you should prioritize getting an employer’s match first, if one is available to you, because it’s free money.

After you’ve contributed enough to your employer-sponsored plan to earn the full match and maxed out your Roth IRA, you can contribute more to your workplace plan or look into other options, such as a spousal IRA, self-employed retirement plan, or taxable investment account.

Frequently Asked Questions (FAQs)

Why should I max out my Roth IRA first?

You’ll typically want to max out your Roth IRA only after you’ve gotten your employer’s full retirement match. After that, maxing out your Roth IRA is a good option because you get unlimited tax-free growth and tax-free retirement withdrawals.

When is the last day to max out my Roth IRA?

You have until Tax Day to max out your Roth IRA. For example, your last day to max out your Roth IRA contribution for 2021 was April 18, 2022.

How much will my Roth IRA be worth if I max it out?

Your Roth IRA’s eventual value will depend on a host of factors, including how many years you contribute to it, whether you can contribute up to the full limit or a phased-out amount, the investments you choose, and the market’s performance.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. "Retirement Topics - IRA Contribution Limits."

  2. IRS. "Amount of Roth IRA Contributions That You Can Make for 2022."

  3. IRS. "Publication 590-A (2021), Contributions to Individual Retirement Arrangements (IRAs)," see “Kay Bailey Hutchison Spousal IRA Limit.”

  4. IRS. "Retirement Topics - Catch-Up Contributions."

  5. Plan Sponsor Council of America. "Retirement Plans Are Looking More SECURE."

  6. IRS. “Topic No. 409 Capital Gains and Losses.”

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