How Much Can I Contribute to My IRA — and When?

Traditional IRAs are a great way to save for retirement, because they give you a tax break for doing so. It's basically a reward for looking after your future self. Roth IRAs are another incentivized way to save, but the tax benefit is delayed — all of your money grows tax-free and comes out tax-free in retirement.

But how do you maximize the benefits of an IRA? Here’s how much and how often to contribute to your traditional or Roth IRA.

How much can I contribute to my IRA?

The IRA contribution limit is $6,500 in 2023 ($7,500 if age 50 and older).

However, the real world isn't usually that simple. You may have a limited amount of money, and you may have a retirement plan at work.

The good news? IRAs can complement workplace plans like 401(k)s, or fill in for them if your employer doesn’t offer one. Here’s one way to think about divvying up your money:

• Contribute enough to your 401(k) or other workplace retirement plan to get the full company match. That’s free money, sometimes dollar for dollar up to a specific percentage of your pay. You don’t want to forfeit it.

• If your 401(k) offers a good variety of low-cost investments (a mutual fund expense ratio of 1% or more is a red flag), you could put as much money as you can into it. The annual maximum is $22,500 in 2023 ($30,000 for those age 50 or older).

• But if your 401(k) isn’t great, then focus on maxing out your traditional or Roth IRA.

• If you have enough money to keep going beyond your preferred account’s limits, then max out your second choice.

This assumes that you've already picked between a traditional and a Roth IRA. Traditional IRAs offer tax-deferred growth — you pay taxes when you take the money out. Roth IRAs, into which you contribute after-tax money, offer tax-free growth on investment earnings.

There are income restrictions on Roth IRAs, which may reduce or eliminate the tax deduction you can take for your traditional IRA contributions. They also may reduce or eliminate your ability to make Roth IRA contributions outright.

» Not sure if a Roth or traditional is best for you? Here’s how to decide between a Roth or traditional IRA.

When should I contribute to my IRA?

If you’ve got the money on hand, then contributing the maximum amount at the beginning of the year means your money has the most time to gain returns.

You can contribute only as much as you earn in any given year (up to the standard contribution limit), but you don’t have to wait until you earn the money. If you get a large bonus at the start of the year, you can make your full annual contribution.

If you’re more of a procrastinator, you can contribute to an IRA as late as the tax filing deadline of the following year.

But I don't have enough to max out an IRA!

For many people, contributing the annual maximum to their IRA all at once is difficult. The next best thing is to set up automatic payments that move money from your bank account to your brokerage account regularly, such as every two weeks or once a month.

Setting up periodic contributions has another benefit, too. You’re embracing the practice of “dollar-cost averaging.” That’s when you buy investments in small periodic payments, rather than in one big lump sum.

Doing that means you buy no matter what the market is doing, and over time the variations average out. This is in contrast to market timing, which is when you try to figure out the best time to buy (generally, when prices are low). The problem with market timing is it’s impossible to know what the market will do tomorrow, so you never know if you’ve timed it right.

Why should I contribute to my IRA?

You want to save for Future You, and the earlier you start, the more time your money will have to grow. Even if you have debt, that’s no reason to put your retirement savings on hold.

If you’ve got time to let your investments grow, then even just a few years of maxing out that IRA contribution can get you a long way to retirement success.