How Much Can You Invest in an IRA Each Month?

Investing money in an IRA can be a great way to save for retirement. You want to max out your 401(k) match from an employer first if you have access to one, as this is free money you get when you sign up with HR to contribute to your workplace plan. But once you've done that, an IRA opened with a brokerage firm can give you access to a broader choice of investments than a 401(k) would offer.

If you're thinking about putting some money into an IRA, you may be wondering how much you're actually allowed to invest in it each month. Here's what you need to know.

The annual IRA contribution limit

There are two types of IRAs most people have access to:

• A traditional IRA that allows you to take a tax deduction for contributions in the year they are made
• A Roth IRA that doesn't offer this upfront deduction but allows you to withdraw from your account tax-free as a retiree.

Since there are tax benefits to these accounts, there is an annual limit on how much you are allowed to put into them. And, whether you want to invest in a traditional or a Roth IRA, there is one annual contribution limit that applies to both accounts.

In 2023, the total amount of combined contributions you can make to a traditional IRA and a Roth IRA is $6,500. If you are aged 50 or older, you can make an additional $1,000 contribution for a total of $7,500. These limits apply to most people, although higher earners have smaller limits or may not be allowed to contribute to these tax-advantaged accounts at all. This limit can also change annually, so check the IRS website each year to see what the current maximum is.

You can divide up your contributions any way you want during the year

Since the annual contribution limit is either $6,500 or $7,500 depending on your age, you are allowed to contribute as much as you want to a traditional or Roth IRA each month as long as you do not exceed the total allowable annual limit.

If you want to split up your contributions evenly over the year, you can do so. You could divide $6,500 or $7,500 by 12 and find that you can contribute $541.67 or $625 each month respectively. You could put all of that money into a traditional IRA, all of it into a Roth, or choose to do a mix and invest in a Roth one month and a traditional IRA the next.

You also have plenty of other options for how much to invest each month though. You could:

• Invest the entire $6,500 or $7,500 at the start of the year, the end of it, or any point in between.
• Invest a big lump sum one, two, three, four, or more times a year.
• Invest a little bit each month and then invest the rest of the amount needed to max out your account at the end of the year.

There's no real set rule for how much monthly contributions can be as long as you keep to the annual caps. So if you want to use either a Roth or a traditional IRA to help you save for retirement, you get to choose how to break up your contributions during the year. You don't have to max out either account -- you can contribute as much as you can afford up to the $6,500 or $7,500 limit.

This flexibility will hopefully help make it easier for you to put a traditional IRA, Roth IRA, or both to work to help you build a more secure future.