How to Max Out Your Roth IRA Every Year

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If you’re trying to stash away more money for retirement, you may have a Roth IRA account.

One of my financial goals every year is to max out my Roth IRA in January. In this post, I’ll explain my simple strategy and how it can work for you…

For 2019, the Roth IRA contribution limit is $6,000, or $7,000 for those 50 and older.

How I max out my Roth IRA every January 

With a Roth IRA, you invest money that you’ve already paid taxes on. In retirement, you won’t pay taxes again when you withdraw the money.

If you want to learn more, here are links to Fidelity and Vanguard.

You can contribute to your Roth IRA at any time during the year, but I’ve developed the habit of maxing out my contributions in January.

How is that possible? You just have to follow my simple savings strategy…

  1. Set short-term savings goals for the entire year
  2. Keep the money that you set aside for your savings challenges in a high-interest savings account like CIT Bank
  3. Transfer the funds to your Roth IRA when you reach $6,000

Since I max out my Roth IRA contributions in January, I can then spend the entire year saving up $6,000 to repeat the process the following year.

For example, here are my savings challenges for 2019:

  • Save $2,019 in 2019: I’m transferring $168.25 every month from my online checking account to an online savings account to reach $2,019 in one year, plus interest.
  • Save my savings: I add up the “You saved” amounts from the bottom of receipts and transfer the total from my checking account to this savings account on a monthly basis.
  • Credit card rewards match: When I go to redeem credit card rewards for travel, gift cards or statement credit, I match the value of the rewards and transfer that amount from my checking account to this online savings account.

RELATED: Save $5,000 in one year with these 3 money challenges

The money that I save with these challenges immediately goes into separate online savings accounts — one for each challenge.

I currently bank with CIT Bank because it has one of the highest interest rates in the nation.

When January 2020 rolls around, I’ll take the money that I saved from the challenges in 2019 (up to $6,000) and max out my Roth IRA for the year.

Then, I can start all over again with new savings challenges for 2020 to fund my Roth IRA in 2021.

Short-term savings goals can be a great motivational tool. If I didn’t have them in place, I don’t know if I would have the discipline to max out my Roth IRA every year.

Have a retirement savings tip to share with me? Leave it in the comments below!

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2 thoughts on “How to Max Out Your Roth IRA Every Year”

  1. I’m confused as to why you are transferring money into a savings account that may be earning ~2%, and then transferring it at the end of the year into your Roth IRA. Aren’t you missing out on dollar cost averaging and possibly a much higher return throughout the year if you just deposited that money into your IRA monthly? Not to mention- if you’re going straight to your IRA each month when you get paid, you’re not faced with the temptation of spending your savings between the beginning and end of the year.

    Reply

    • Thanks for the comment. I am not transferring it at the end of the year — I max out my Roth IRA every January.

      After I max out my Roth IRA, I use the savings challenges to set aside money to fund the Roth IRA the following year. I do this to keep myself motivated to save for retirement.

      This is what works for me, but do whatever is right for you — as long as you’re saving.

      Reply

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