Crush Your Roth IRA Contribution Goals For 2022 At $25 A Day | personal finance

(Charlene Rijnhart, CPA)

If you’re looking to max out your Roth IRA (Individual Retirement Account), now might be the perfect year to give it a shot. All you need to do is create a game plan and put your contributions on autopilot. The best part is that with just $25 a day you can get closer to your goals so you don’t have to worry about sacrificing your lifestyle.

We break down the secret sauce to maximize your Roth IRA if you are under 50.

Image source: Getty Images.

Open a Roth IRA if you haven’t already

Let’s get the ball rolling by opening a Roth IRA. You can compare the application incentives and costs, as well as the research and resources offered by different financial institutions. Once you’ve found a custodian, it shouldn’t take you more than 20 minutes to open your account.

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You want to make sure you qualify to make direct contributions to a Roth IRA this year before starting your $25-a-day game plan. You need a year of earned income to make contributions, but you will be penalized if you put too much money into the account.

If you are under 50, your contributions are limited to $6,000. Depending on your income, your personal contribution limit may be lower. Your adjusted adjusted gross income (MAGI) is the magic number to keep an eye on.

Once your income reaches $129,000 (single) or $204,000 (married), you enter the danger zone, known as the phase-out range. Your maximum premium limit drops when you are within this range. When your income exceeds the upper limit, you cannot make direct contributions to a Roth IRA. Contribute as much as you can while you qualify so you can build a portfolio of assets that you can withdraw 100% tax-free when you reach 59 1/2.

These are the phase-out ranges for 2022.

Submission Status

2022 Phasing out income range

2021 Income range phasing out

Single or family head

$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: Belastingdienst. Chart by author.

Set Up Your Roth IRA Contribution Plan

Now that you’ve checked the qualifications box, it’s time to maximize your account by funding it. If you want to deposit $6,000 into the account, here is the game plan:

  • Determine your time horizon. If you have 12 months to contribute $6,000, that works out to $500 per month.
  • If $500 sounds like too much to contribute each month, break your goal down into bite-sized actions. To reach that monthly goal, you need to set aside $125 each week. Let’s say you make $25 an hour. You can allocate five hours of income to your Roth IRA to meet your weekly target.
  • If you want to split your monthly contribution into days, that comes out to $25 per day for five days a week.
  • Take control of your spending so you can delete everything you don’t use or need. If you reduce your expenses, you have more money to save.

Develop a different contribution plan if you start later in the year

If you run out of 12 full months to contribute to your Roth IRA for the current year, you can start with a lump sum for the missed months and then continue with the $25-a-day game plan.

Let’s say you start your membership plan in June. You have until the next year’s tax deadline to make contributions from the previous year. Here’s a sample game plan that will have you pocketing $25 a day five days a week (after you’ve paid your lump sum):

  • June: $1,000
  • July: $500
  • August: $500
  • September: $500
  • October: $500
  • November: $500
  • December: $500
  • January: $500
  • February: $500
  • March: $500
  • April: $500

Put your contributions on autopilot so you’re not tempted to interfere with the plan. You can have $25 a day sent to a checking or savings account and then set up monthly recurring deposits for $500 from your financing account to your Roth IRA. Before you know it, your Roth IRA is maxed out and you can invest in your favorite assets.

Your contribution goals are at your fingertips

By starting with $25 a day, you can easily crush your Roth IRA goals. All you need to do is break your bigger goals into bite-sized pieces. Instead of dedicating all the work to your future self, you can take daily steps toward the goals you want to achieve.

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