Since the annual contribution limit for Roth IRAs can be several thousand dollars, some people prefer to break up the annual contribution into more manageable monthly contributions. Knowing how much to put in each month helps you budget to maximize your contributions but not get hit with excess contribution penalties.

## Maximum Monthly Contribution

The IRS restricts your annual Roth IRA contribution to the smaller of the annual limit or your total compensation for the year, whichever is lower. As of the time of publication, the maximum contribution is $5,000. Taxpayers age 50 and older can make a "catch-up" contribution of $1,000, making their total contribution limit $6,000. To figure the monthly contribution required to max out a Roth IRA, divide your annual limit by 12. For example, if your contribution limit equals $6,000, divide $6,000 by 12 to find you need to put in $500 per month to maximize your Roth IRA contributions for the year.

## Contributions Not Tracked Monthly

The IRS does not break down your annual contribution limit by month, which is significant because if you miss a month, you can put in extra in the following month to make up for it without incurring excess contribution penalties. The final deadline for completing your annual Roth IRA contributions is the tax deadline, typically April 15 of the following year. This means that even if you are under the limit at the end of December, you still have a few extra months to get those contributions in. If you do make a contribution for the prior tax tax in the next calendar year, inform your financial institution to count it towards the prior tax year.

## Beware Cumulative Limits

The IRS sets the annual contribution limits for Roth IRAs to be cumulative with traditional IRAs, so any contribution you make to a traditional IRA decreases the contribution limit for your Roth IRA. If you plan to contribute to both a traditional IRA and a Roth IRA, you need to factor this in when calculating your monthly contribution to maximize your Roth IRA. For example, if your annual contribution limit for your Roth IRA equals $5,000, but you put $2,000 in a traditional IRA, subtract $2,000 from $5,000 to get a maximum annual contribution of $3,000 and divide $3,000 by 12 to find your maximum monthly contribution to your Roth IRA equals $250.

## Compensation Minimums

Only taxable compensation you receive for working during the year satisfies the minimum compensation requirement to contribute to a Roth IRA. Examples of compensation include your wages, bonuses or salaries. You cannot count interest or investment income, gifts or pension income as compensation for contributing to a Roth IRA. For example, if you earn $2,000 for working and have $40,000 in investment income, you could only contribute a maximum of $2,000 to your Roth IRA that year.

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