Setting aside money regularly is one of the surest ways to save for retirement–especially when you take advantage of tax savings over time. Though some retirement accounts are tax-deferred, one popular option that isn’t tax-deferred is a Roth IRA. However, to make the most of a Roth IRA, you need to know how it works and what the maximum contribution limits are. One straightforward strategy in particular can help you maximize your savings.

A financial advisor could help you evaluate your retirement plan’s performance and help you select investments that align with your financial goals.

How Does a Roth IRA Work?

A Roth IRA is an individual retirement account that allows you to withdraw money on a tax-free basis upon retirement. Roth IRAs are funded with after-tax dollars. In a traditional IRA, you fund the account with pre-tax money and pay income taxes when it comes time to withdraw. In the case of a Roth IRA, you fund the account with post-tax money and pay no taxes at retirement on either the principal or interest so long as you’ve held the account for at least five years.

Roth IRAs are generally considered more flexible than traditional IRAs. For example, some early withdrawals may be allowed on a tax-free basis if you’ve met both the five-year rule and specific conditions required for a qualified distribution. Otherwise, your withdrawal may be subject to taxes and penalty fees. You also are not required to withdraw from your Roth IRA for as long as you live if you don’t want to, which makes Roth IRAs rather valuable estate-planning tools.

What Are the Roth IRA Contribution Limits?

The IRS limits Roth-IRA contributions by income level, so if you’re married and file jointly, your combined income cannot exceed $246,000 if you want to contribute to one. You can contribute up to the maximum limit if you earn less than $236,000, but as your income increases, the amount you can contribute is phased out.

For 2025, the maximum total contributions you can make to all your IRAs, either traditional or Roth, cannot exceed $7,000 a year. If you’re aged 50 or older, the IRS allows you an additional catch-up contribution of $1,000, bringing your total to $8,000 for the year.

Although this may not sound like much if you assume a 7% rate of return, just $6,000 invested annually can build up to $612,438 over 30 years. You’ll have contributed a total of $180,000 and earned $426,438 in interest. You don’t even have to max out your contributions to reach this level.

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How Much Should You Put in a Roth IRA per Month?

Since Roth IRA contributions are limited by income, many individuals often wait until they do their taxes to contribute. While any money saved for retirement is positive, financial experts don’t recommend this method for maximizing your savings.

A better method is to follow a dollar-cost-averaging approach. If you contribute only once a year to your Roth IRA, you may be investing your money during a high or low moment in the market, which could potentially keep you from earning the maximum amount over time. With dollar-cost averaging, you don’t time the market.

Instead, you invest a set amount of money evenly throughout the year regularly. This allows you to earn interest over the entire year and smooths out the ups and downs, giving you more bang for your buck.

Because the maximum annual contribution amount for a Roth IRA is $7,000, following a dollar-cost-averaging approach means you would therefore contribute $583 a month to your IRA. If you’re 50 or older, your $8,000 limit translates to just about $667 a month.

If you invest $6,000 once a year at an average 7% rate of return, you could have $612,438 in your IRA after 30 years. On the other hand, if you invest $500 a month, you could end up with $658,684. That’s an estimated increase of nearly $40,000 just from contributing monthly instead of annually.

Bottom Line

In 2025, the maximum amount you can contribute to a Roth IRA is $7,000. Since you derive the most benefit from tax-free growth by allowing your funds to earn interest over time, contributing $583 monthly to your Roth IRA instead of once a year means you can earn more than $40,000 extra over your lifetime. Saving for retirement can be complicated, however, and deciding which retirement plans and accounts work best depends on your situation.

Retirement Planning Tips

Not sure what investments or strategies you need for a smooth retirement? For a solid, long-term financial plan, consider speaking with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Use SmartAsset’s free retirement calculator to get a good first estimate of how much money you’ll need to retire.