Determining Roth IRA Contributions for Your Needs

Determining the proper Roth IRA contributions for your situation can be difficult. Many people do not know how much they need to contribute in order to live the lifestyle that they want upon retirement. Here are a few things to consider about how to determine how much to contribute to a Roth IRA.

Roth IRA Contributions

The maximum amount that you can contribute to a Roth IRA is currently $5000 per year. If you are over the age of 50, you can contribute up to $6000 per year. However, many people do not reach the maximum contribution each year. If you want to be able to retire comfortably, you need to try and max out the contributions each year. 

Example

Here are some numbers to help you understand why it is important to max out your contribution to a Roth IRA. Let's say that you start saving when you are 30 and retire at the age of 60. You decide to put $5000 per year into your Roth IRA. Let's also assume that you will earn 8% per year on your investments. When you retire, you would have a little over $600,000. Many people would argue that this is not enough to live on during retirement. Therefore, if you do not contribute a maximum every year, there is a good chance that you will not have enough to retire on. Use an online Roth IRA calculator in order to determine exactly how much you need to contribute.

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