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The rules around Roth IRAs are about to change, as the IRS has announced updates to the income limits for contributing to this popular retirement savings account.

Roth IRAs offer a unique way to save for retirement, as they allow contributors to invest money that has already been taxed, so that withdrawals in retirement are tax-free. This can be a great way to maximize your retirement savings, but until now, there were limits to who could contribute to a Roth IRA based on their income.

Starting in 2021, those income limits will be changing. Under the new rules, individuals with a modified adjusted gross income (MAGI) below $125,000 will be able to contribute the full amount to a Roth IRA, which is currently set at $6,000 per year for those under 50, and $7,000 per year for those over 50.

For those with incomes above $125,000 but below $140,000, there will be a partial contribution limit. This means that the amount you can contribute to a Roth IRA will vary based on your income. Those with incomes above $140,000 will no longer be eligible to contribute to a Roth IRA.

For married couples filing jointly, the income limits are higher. Those with a MAGI below $198,000 will be able to contribute the full amount to a Roth IRA, while those with incomes between $198,000 and $208,000 will have a partial contribution limit. Couples with incomes above $208,000 will no longer be eligible to contribute.

These changes to the Roth IRA income limits are designed to provide more flexibility for those looking to save for retirement. By expanding the number of people who can contribute to a Roth IRA, the IRS is making it easier for individuals and couples to save for retirement in a tax-efficient way.

Of course, it is important to keep in mind that other rules around Roth IRAs still apply. For example, you must have earned income in order to contribute to a Roth IRA, and there are age limits on contributions as well. Additionally, while contributions to a Roth IRA are not tax-deductible, there are other benefits to consider, including the potential for tax-free growth and withdrawals in retirement.

Overall, the changes to the Roth IRA income limits represent a positive development for those looking to save for retirement. By offering more flexibility and expanding eligibility, the IRS is helping more people take advantage of this powerful retirement savings tool. If you are considering a Roth IRA, be sure to consult with a financial advisor to determine if it is the right choice for you.