You choose both when to deposit money and what investments hold it

A Roth IRA is a container for money and investments, not an investment itself. You control two separate decisions: how much money you move into the account each year, and what that money buys once it's inside. The first is a deposit decision. The second is an investment decision. They happen at different times and through different steps.

Your bank or brokerage—the company that holds your Roth IRA—gives you the tools to do both. You deposit money through their website or app, the same way you'd transfer money between checking accounts. Then, using that deposited money, you purchase investments through the same platform. The investments sit in your Roth IRA and grow tax-free.

Key Takeaways

  • You can deposit up to $7,000 per year into a Roth IRA (or $8,000 if you are 50 or older), but only if your income is below the limit your brokerage will tell you.
  • Money must come from earned income—wages from a job—not from investments, gifts, or unemployment benefits.
  • After you deposit money, you use that cash to buy investments like mutual funds, exchange-traded funds, or individual stocks through your brokerage's platform.
  • You can deposit money anytime during the year, but you have until the tax filing deadline (usually April 15) to deposit for the previous year.
  • Different brokerages offer different investment choices, so the investments available to you depend on where you opened your Roth IRA.

How much you can deposit each year

The IRS sets an annual limit on how much you can put into a Roth IRA. For 2024, that limit is $7,000 per year if you are under 50, or $8,000 if you are 50 or older. This limit applies to all your IRAs combined—if you have both a Roth IRA and a traditional IRA, the $7,000 covers deposits to both accounts together, not each one separately.

There is also an income limit. If you earn above a certain amount, you cannot deposit the full $7,000. The income threshold varies by filing status and changes each year. Your brokerage will tell you whether you can deposit the full amount based on your income when you try to make a deposit. If your income is too high, you may be able to use a backdoor Roth strategy, which is a separate process—ask your brokerage or tax preparer about this if it applies to you.

Where the money has to come from

You can only deposit money you earned from working. This means wages from a job, self-employment income, or taxable alimony. You cannot deposit money from investments, gifts, inheritance, unemployment benefits, or Social Security. Your brokerage will ask you to confirm that deposits come from earned income.

If you are married and your spouse works but you do not, you can still deposit to a Roth IRA using your spouse's earned income, as long as you file taxes jointly. This is called a spousal Roth IRA. The deposit still counts against the annual limit, so if your spouse deposits $7,000 to their own Roth and you deposit $7,000 to yours, that is $14,000 total—which is allowed.

The steps to deposit money into your account

Log into your brokerage account online or through their app. Look for a link labeled "Deposit," "Fund Account," "Add Money," or "Transfer Funds"—the exact wording varies by company. Click it and choose "Roth IRA" as the account type.

You will then choose how to move the money. Most brokerages offer a bank transfer, where you link your checking or savings account and move money electronically. This usually takes one to three business days. Some brokerages also accept wire transfers (faster but may have a fee) or checks mailed to their address. Enter the amount you want to deposit and confirm. The money will appear in your Roth IRA as cash, ready to invest.

Keep in mind that depositing money does not automatically invest it. The cash sits in your account until you choose what to buy. Some people deposit money and leave it as cash temporarily while they decide what investments to purchase. Others deposit and invest on the same day.

Choosing what investments to buy with your deposit

Once your deposit is in your Roth IRA, you use that cash to purchase investments. The most common choices are mutual funds and exchange-traded funds (ETFs). A mutual fund is a basket of stocks or bonds managed by a professional. An ETF is similar but trades like a stock. Both let you own many companies with a single purchase instead of buying individual stocks one at a time.

Your brokerage's website or app has a search tool where you can find funds by name or ticker symbol. You choose how many shares to buy, and the cash in your account pays for them. The investments then sit in your Roth IRA and grow. You can buy and sell investments inside your Roth IRA without paying taxes on the gains—that is the main benefit of the account.

If you are unsure what to buy, many brokerages offer target-date funds, which automatically adjust from stocks to bonds as you get closer to retirement. You pick the fund based on the year you plan to retire, and the fund handles the rest. This is a straightforward choice for people who do not want to pick individual investments.

When you can deposit money during the year

You can deposit money into your Roth IRA anytime during the calendar year. There is no rule that says you must deposit all at once or by a certain date within the year. Some people deposit monthly, some quarterly, and some deposit the full year's amount in January.

The only deadline that matters is the tax filing deadline, usually April 15 of the following year. If you want to count a deposit toward the previous year's limit, you must deposit by April 15. For example, if you want to deposit $7,000 for 2024, you can do so anytime in 2024 or by April 15, 2025. After April 15, any deposit counts toward the current year's limit instead.

What happens if you deposit too much

If you deposit more than the annual limit, the IRS charges a 6% penalty tax on the excess amount each year it stays in the account. You can fix this by withdrawing the excess and any earnings it made before the tax filing deadline. Your brokerage can help you calculate how much to withdraw.

If you do not catch the excess in time, you will owe the 6% penalty when you file taxes. You can still withdraw the excess after the deadline, but you will owe the penalty for that year. It is worth fixing as soon as you notice, because the penalty compounds each year the excess stays in the account.

How different brokerages affect your investment choices

The investments available to you depend entirely on which brokerage holds your Roth IRA. A large brokerage like Fidelity, Vanguard, or Charles Schwab offers thousands of mutual funds and ETFs. A smaller or specialized brokerage might offer fewer choices. Some brokerages charge fees to buy certain funds; others do not.

Before you open a Roth IRA, it is worth checking what investments each brokerage offers and whether they charge fees. If you already have a Roth IRA with one brokerage and want access to different investments, you can transfer the account to another brokerage without tax consequences. This is called a trustee-to-trustee transfer, and your new brokerage can walk you through the process.

Frequently Asked Questions

Can I deposit money I received as a gift or inheritance?

No. Roth IRA deposits must come from earned income—wages, self-employment income, or taxable alimony. Gifts, inheritance, investment gains, and benefits do not count. You can use a gift to pay for living expenses so you have more of your own earned income available to deposit, but the deposit itself must come from money you earned.

What if I do not have $7,000 to deposit all at once?

You can deposit any amount up to $7,000 throughout the year. Many people deposit $100 or $500 at a time as they receive paychecks. There is no minimum deposit amount, and you do not have to deposit the full limit. Deposit what you can afford.

Do I have to invest the money right after I deposit it?

No. After you deposit money, it sits as cash in your account until you choose to buy investments. Some people deposit and invest immediately. Others deposit and wait weeks or months while they research what to buy. The cash earns no interest while it waits, so most people invest it fairly soon, but there is no rule requiring you to.

Can I move money from my checking account to my Roth IRA and back out again to avoid the annual limit?

No. Once money is deposited into your Roth IRA, it counts against your annual limit for that year, even if you withdraw it immediately. The IRS tracks deposits, not what you do with the money after. If you deposit $7,000 and withdraw $6,000 the next day, you have still used your full $7,000 limit for the year.

What if my income goes up and I become ineligible to deposit?

If your income exceeds the limit partway through the year, you can still deposit up to the point you became ineligible. For example, if the limit is $150,000 and you earned $140,000 by September, you can deposit based on that income. If you then earn $20,000 more and exceed the limit, you should stop depositing. Talk to your brokerage or tax preparer about how much you can safely deposit based on your expected year-end income.