This lesson is general education about U.S. personal finance, not financial, tax or investment advice. Tax rules and limits change every year; check IRS.gov or a qualified professional for your situation.
What you’ll learn
- In 2026 you can put up to $7,500 a year into IRAs, or $8,600 if you’re 50 or older.
- Traditional contributions may be deductible now; withdrawals are taxed later.
- Roth contributions aren’t deductible, but qualified withdrawals are tax-free.
- Roth eligibility phases out between $153,000 and $168,000 of income for single filers in 2026.
An individual retirement account, or IRA, is one you open yourself at a bank or brokerage firm. You need earned income, such as wages or self-employment income, to contribute.
Side by side
| Traditional IRA | Roth IRA | |
|---|---|---|
| Contributions | May be tax-deductible | Not deductible |
| Growth | Tax-deferred | Tax-free if withdrawals are qualified |
| Withdrawals in retirement | Taxed as income | Tax-free if qualified |
| Income limit to contribute | None | Yes, phases out at higher incomes |
| Required minimum distributions | Yes, starting at age 73 or 75, depending on birth year | None for the original owner |
2026 limits
You can contribute up to $7,500 in total across all your IRAs for 2026, or $8,600 if you’re 50 or older. You can’t contribute more than your earned income for the year.
Roth eligibility depends on modified adjusted gross income. In 2026 the allowed contribution shrinks between $153,000 and $168,000 for single filers and between $242,000 and $252,000 for married couples filing jointly.
Which one fits?
Ask yourself one question: is my tax rate likely to be higher now or in retirement?
- Lower now than later, which is typical early in a career: Roth contributions let you pay tax at today’s lower rate.
- Higher now than later: a deductible traditional contribution saves tax at today’s higher rate.
- Not sure: many people split their savings between the two for flexibility.
Try the math. In the 22% federal tax bracket, a deductible $5,000 traditional contribution saves $1,100 of tax this year. A $5,000 Roth contribution saves nothing now, but every qualified dollar it grows into comes out tax-free.
Where an IRA fits
If your employer offers a match, it usually makes sense to collect the full match in your 401(k) first. An IRA can then be the next step, and it’s also where many people move an old 401(k) after changing jobs.
Common questions
Can I have an IRA and a 401(k)?
Yes. Being covered by a workplace plan doesn’t stop you contributing to an IRA, but it can limit whether traditional IRA contributions are deductible, depending on your income.
Can I take money out of a Roth IRA early?
Your contributions can be withdrawn at any time without tax or penalty. Earnings are different: they’re generally tax-free only after age 59½ and once the account has been open five years.
What’s the deadline for contributing?
You can make contributions for a tax year until the tax filing deadline the following spring, usually April 15.