Maxed Out Your Roth IRA Contributions? Here's What You Can Do Next

When it comes to saving for retirement, one of the most common recommendations is to find a great Roth IRA. Unlike the traditional IRA, you'll pay taxes when you deposit money into the account Then, you'll pay no more taxes on the money in the account, including any growth, unless you decide to take the money out before age 59 1/2.

What's The Limit?

The Internal Revenue Service caps the amount that you can put into a Roth IRA. Currently, you can put in $5,500 annually. If you're married and you meet the income limits, you can put in the same amount for your non-working spouse. This means that a family could save a maximum of $11,000 in a Roth account each year.

To meet the maximum level, you'd have to save $458.33 monthly over the course of a year. A couple would have to save a little more than $900 monthly to meet the max. You could take that much out of your paycheck each month, but automatic deductions are the best, as you would not have to think any more about the process.

But what happens if you reach the limit?

What Can You Do With The Extra Money?

Pay Off Your Mortgage

If you're in the fortunate position to have more money left over after maxing out a Roth IRA, you could use it to pay down a home mortgage. This is likely your biggest monthly payment. Additionally, you'll get a return that's equal to your mortgage rate on any prepayments. Even if you can't pay off the entire mortgage, it’s okay. It’s still nice to have higher equity and the ability refinance your house.

Pay Off Other Debts

If you've been able to max out your IRA and you've paid off your home, you might look into paying off other debts that you might have. These could range from high-interest credit cards to auto loans to student debt. The credit cards would be the best option to accelerate your payoff.

Save For Other Purposes

If you've maxed out your Roth IRA and you've paid off all of your debts, you might look to save a bit more of your income in other vehicles. Any additional savings can serve as an emergency fund, which will pay off if you have an unexpected repair or medical emergency.

If you've saved up six months of expenses, you can also start saving in money market accounts, online high yield savings, or start actively investing your money.

Have Fun And Spend The Excess Money

If you've ticked off most or all of the recommendations above, you should enjoy some of that extra money. If you've dreamed of taking a vacation to Europe or some other far-off location, putting some money aside to take the trip can be a great option. You could also buy that classic muscle car that you've always dreamed of.

If you have more disposable income left over after maxing out your IRA, you can still continue to improve your financial situation.