How do IRA contributions work?

In general, the money you contribute to your IRA must come from earned income, which is money you make from your job, such as wages, tips, or a salary, and have paid taxes on. If you’re not working, however, you still may be able to contribute to an IRA if you’re married, your spouse has earned income, and you file a joint tax return. Your earned income can be deposited into your IRA at any time, but the total amount you can add each year is decided by the IRS.

What’s the annual IRS contribution limit?

The IRS sets a maximum amount you can add to your IRA(s) each year based on your age, tax year, inflation, and other factors determined by the IRS. 

Two popular types of retirement savings accounts, traditional and Roth IRAs, have the same IRS annual limit for 2025. You can contribute up to $7,000 if you’re under the age of 50 and $8,000 if you’re 50 or older. If you have multiple IRAs, you can split your contributions, such as $4,000 in your traditional IRA and $3,000 in your Roth, but your total contributions across all your IRAs can’t exceed the annual limit. If you have a Roth IRA, your ability to contribute also could be reduced or eliminated based on your income and tax filing status. 

If you’re self-employed or own a small business, you may have a SEP or SIMPLE IRA, which have different contribution rules and often higher limits than other types of IRAs. You can look up the limit for your specific IRA on the IRS website.

What’s the IRA contributions deadline?  

Although the IRS tax year runs from January 1 to December 31, you have until April 15 of the following year to make your maximum contribution. So, for the 2025 tax year, you can contribute up to your limit anytime from January 1, 2025, through April 15, 2026, or the deadline of your annual tax filing. 

Are there any benefits of contributing early?

Yes—you may want to consider adding to your IRA as soon as you have cash available. The earlier you save and invest your contributions, the more time your money may grow through compounding. That’s when your investments generally earn money, and those earnings are reinvested to earn you more money. 

IRA compounding over time

To see what a difference compounding can make, try using an online calculator that shows you how different contribution amounts could hypothetically grow your retirement savings over time.

When’s the best time to add money to your IRA?

Now that you know the maximum amount you’re allowed to contribute, the benefits of saving early, and the deadline for putting money into your IRA, we’ll help you find the best time to make your deposit. Consider these three options—and you can choose a different option each year as your financial situation changes.

Option #1—lump sum once per year

One common strategy is to make a lump-sum contribution annually. Some people wait until closer to their annual tax deadline. If you have a lump sum to deposit but are waiting, you might miss out of up to 15.5 months of compounding. While a lump sum can be convenient, it’s most effective when done as soon as you have the cash available.

Option #2—small contributions throughout the year

If a lump-sum contribution seems overwhelming or not practical, then small, consistent contributions—especially if you can automate them—can help you take advantage of time in the market. This can make sense if you work a seasonal job, are in sales and earn a variable commission, or can only afford a little at a time. 

Option #3—when you receive a bonus or unexpected cash

If you receive periodic bonuses from your employer or come into some unexpected cash, such as an inheritance, directing these funds into your IRA as soon as possible may be your best move. With this strategy, you can invest extra money without affecting your regular budget. Plus, by putting the money promptly into your IRA, you may be less tempted to spend it.

Why time matters most

You don’t need to contribute all at once to make a meaningful impact on your retirement savings. By prioritizing early contributions to your IRA, whether through small, routine deposits or by investing windfalls promptly, you can take advantage of time in the market. The key is to start contributing as soon as you can and invest your savings—then let compounding and time work in your favor. With these strategies, you can shift your mindset from having to contribute by a set date to finding a saving strategy that works best for you and your personal finances.