The 2025 Contribution Limits

For 2025, you can put up to $7,500 into a Roth IRA — or $8,600 if you're 50 or older. The catch-up amount (that extra $1,100 for those 50+) is real money over time, according to IRS guidance updated March 2026.

But there's a catch. You can only contribute what you actually earned that year. If you made $4,000 from a job, you can only put $4,000 into your Roth, even if the limit is higher.

Income also matters. If you're single and earn more than $150,000, your contribution shrinks. Earn more, and it shrinks further, until it disappears entirely at a higher threshold. Married couples filing taxes together get a higher income limit, according to Schwab's summary. This phase-out tends to hit hardest in expensive cities where two-income households cross over from allowing full contributions to partial ones mid-career.

A Roth IRA has a structural edge: you contribute money you've already paid taxes on, your money grows tax-free, and you never have to withdraw anything during your lifetime. That fundamental advantage doesn't change year to year. What does change is the annual contribution ceiling and the income thresholds.

Here's the practical reality: if you make too much to contribute the full amount directly, there's a workaround called a "backdoor Roth" (you contribute to a traditional IRA first, then convert it to a Roth). The process is mechanical but requires attention to detail, especially if you already have other traditional IRA accounts sitting around. That's where professional guidance usually makes sense.

Teaching Your Kids to Save: Custodial Roth IRAs

You can open a Roth IRA for your child if they earned money themselves. They could work a summer job, babysit neighbors, or help in a family business. The rule is simple: the contribution cannot exceed what they actually earned, and it cannot exceed the annual limit ($7,500 in 2025), whichever is smaller, according to Congressional Research Service analysis from April 2026.

A teenager who earned $3,000 from a summer job can have up to $3,000 contributed to their Roth. That money then sits there for 50+ years, compounding tax-free. The numbers get very large over that kind of horizon.

One important note: the income your child earned has to be real and verifiable. If you own a business and want to employ your child, you can — but the job must be genuine and the pay must be market-rate. The IRS doesn't take kindly to arrangements that look manufactured just to fund an account.

Inheriting an IRA: The 10-Year Deadline

If someone leaves you an IRA in their will, federal rules give you ten years to withdraw all the money. That's according to IRS Publication 590-B.

There are exceptions. Surviving spouses get different treatment. So do minor children of the person who died, people with serious disabilities or illnesses, and people close in age to the person who left the IRA. Those exceptions allow for a slower withdrawal schedule, sometimes spread over a lifetime.

For most inheritors, though, ten years is the deadline. An inherited IRA of $100,000 has to be emptied by the end of the tenth year following the death.

The tax complication is real. When you withdraw from an inherited traditional IRA, you pay income tax on that withdrawal. If you take it all out in year ten, it's one massive taxable event in a single year. You don't have to take equal amounts each year — the rules just say the whole thing must be gone by year ten. Whether you take it gradually or all at once is a question worth thinking through, especially if a big withdrawal in one year would push you into a higher tax bracket.

Workplace Retirement Plans Just Got an Auto-Pilot Feature

New federal law (SECURE 2.0) requires most 401(k) and 403(b) workplace plans to automatically enroll employees and automatically increase their contribution amount each year, according to Treasury Department analysis from September 2024.

The logic is simple: many people never sign up for retirement plans if they have to opt in and think about it themselves. But if the money comes out automatically, they save more. Research shows that automatic enrollment bumps participation rates up by 10 to 20 percentage points compared to "sign up if you want." The effect is strongest among younger workers and lower-income workers — the groups least likely to wade through enrollment paperwork on their own.

SECURE 2.0 applies this mechanic broadly across the country, though existing plans got some extra time to comply. New plans have to implement it sooner.

Over the past couple of decades, Congress has repeatedly relied on behavioral defaults — letting inertia work in your favor rather than requiring active decision-making — to nudge retirement savings up. SECURE 2.0 is another step in that direction. It won't solve America's retirement savings crisis by itself, but it's friction in the right direction.

A Savings Account That Never Happened

For context: the Treasury Department once proposed something called a "Lifetime Savings Account" that would allow anyone to stash $7,500 per year with zero restrictions on when you could withdraw it. No penalties. No waiting until retirement. You just put money in and take it out whenever you wanted, according to Treasury documentation from January 2003.

It never became law. The idea was appealing — a simple, flexible savings tool — but it didn't gain enough political traction. It's worth knowing about only because it explains why $7,500 keeps appearing in different savings-related proposals. People sometimes confuse it with the actual Roth IRA limit, which also happens to be $7,500. The Lifetime Savings Account has no legal standing today.

These Rules Talk to Each Other

None of these rules exists in a vacuum. Imagine this real scenario: You're earning just over $150,000, so you can't contribute directly to a Roth IRA anymore. You have a teenager with a summer job who could open a custodial Roth. And your parent just left you an inherited IRA with a ten-year withdrawal deadline.

Now you're juggling three separate tax and compliance calendars at the same time. Each one affects your tax bill. Each one has different rules. Solving for all three simultaneously takes integrated planning.

Over the past twenty years, Congress and the Treasury have consistently made it easier to contribute — higher limits, automatic enrollment, broader access. What hasn't gotten simpler is what happens when you withdraw: the tax mechanics, the beneficiary rules, the timing questions. That gap between the simplicity of saving and the complexity of withdrawing remains the central planning challenge.