Do I Make Too Much Money to Contribute to a Roth IRA in 2022?

The Roth IRA (individual retirement account) often receives praise for its ability to grant you access to tax-free money during retirement. Although this offer is attractive, you must meet certain requirements before you can make a direct contribution to a Roth IRA. If you contribute to the account and aren’t eligible to do so, you could face penalties.

We’ll dive into the requirements you need to meet to make direct contributions to a Roth IRA. This is especially important for individuals with rising incomes. Your income could bump you over the thresholds and leave you with a different set of decisions to make.

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How a Roth IRA works

Many savers flock to the Roth IRA as early as possible to build their tax-free portfolios. You can contribute after-tax dollars to the account and watch your money grow tax-free. When you’re eligible to withdraw the funds, you can withdraw 100% of your money without sweating over taxes.

The Roth IRA is alluring because it allows anyone to contribute money, as long as they have earned income. You can even open a Roth IRA for your child and allow time to work in their favor.

For 2022, qualified individuals under 50 can contribute up to $6,000 to a Roth IRA. Once you turn 50, your contribution limit rises to $7,000.

Since the Roth IRA is typically reserved for low- and moderate-income taxpayers, you have to keep tabs on the income requirements to ensure you can make a direct contribution.

Pay attention to the income requirements

Your income could stand between you and your direct access to a Roth IRA. If you receive a bonus or increase in pay, your income could push you over the annual income thresholds.

The total income you received during the year is not the number you need to pay attention to during tax time. Your modified adjusted gross income (MAGI) is the real MVP. This number could be the same as your adjusted gross income (AGI). Your MAGI is a minor tweak to your AGI, which includes some deductions removed from your original tax calculation.

For 2022, single filers can contribute up to $6,000 to a Roth IRA if their income is below $129,000. A married couple filing a joint return can make the maximum 2022 contribution if their joint income is less than $204,000.

Welcome to the phase-out range

Contributions can get a bit complicated after you enter the phase-out income range. This is the moment when you’re not allowed to make maximum contributions to a Roth IRA. However, you can still make reduced contribution amounts until your income exceeds the threshold.

If you’re single, you won’t be able to contribute the maximum amount to a Roth IRA when your income surpasses $129,000. However, you can qualify for reduced contribution amounts until your income shoots over $144,000.

A married couple filing a joint return can’t contribute the full amount to a Roth IRA when their income falls between $204,000 and $214,000. You’ll be on the hook for penalties if you keep money in a Roth IRA if your income exceeds $214,000.

Take a look at the phase-out ranges for your filing status to ensure you don’t exceed the limits.

Roth IRA Income Phase-Out Ranges

Filing Status

2022 Income Range

2021 Income Range

Single or head of household

$129,000 to $144,000

$125,000 to $140,000

Married filing jointly

$204,000 to $214,000

$198,000 to $208,000

Data source: IRS. Chart by author.

Life after the phase-out range

Fortunately, you may not have to kiss your dreams of tax-free income goodbye after your income surpasses the limits. There’s an alternative way to achieve your goals, and it’s called the backdoor Roth IRA. This strategy allows you to contribute money to a traditional IRA first and then instantly convert that money into a Roth IRA. That way, no matter what your income is now, you can lock in a 0% tax rate during retirement.

Make sure you understand the rules before executing this strategy. If you have other traditional IRAs in your portfolio, you’ll need to do additional research to avoid any trouble with the IRS.

Contribute as much as you can now

If you qualify to make direct contributions to a Roth IRA, enjoy the easy access while you can. Find a way to maximize your contributions every year so you can expand your tax-free income opportunities during retirement.

If you’re in the phase-out range or have already exceeded the thresholds, review your options and next steps. Strategies like the backdoor Roth IRA may not last forever, so you want to jump on the opportunities to learn more about maximizing your account right now.

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