IRA Accounts Explained: Traditional vs Roth, 2026 Limits, and How to Open One
Key takeaways
- An IRA is a personal retirement account you open yourself at a brokerage, separate from any employer.
- In 2026 you can contribute up to $7,500 across your IRAs, plus a $1,100 catch-up at 50 and over (up to $8,600 total).
- Traditional IRA deductions can be limited if you have a workplace plan, and high earners can be phased out of contributing directly to a Roth IRA.
- An IRA usually offers far more investment choice and lower costs than a workplace 401(k), which is why many people use both.
- Opening one is simple: choose a low-cost brokerage, pick traditional or Roth, fund it, and invest in low-cost index or target-date funds.
An IRA, or Individual Retirement Account, is a personal retirement account you open yourself at a brokerage, separate from any employer. It is the main do-it-yourself piece of a US retirement plan, alongside employer plans and Social Security. Unlike a workplace plan, nobody sets it up for you; you choose the provider, the type, and the investments inside it.
My own Roth IRA was the account I understood least and valued most once I figured it out. It gave me low-cost index funds my teaching 403(b) never offered, and I controlled every part of it. Here is how IRAs work and how to open one.
What an IRA is and the two types
An IRA is a tax-advantaged account you fund with your own money, and it comes in two main types: traditional and Roth. Both let your investments grow without yearly tax drag; the difference is when you pay tax.
- Traditional IRA: you may get a tax deduction now, and withdrawals in retirement are taxed as ordinary income.
- Roth IRA: you get no deduction now, but qualified withdrawals in retirement are completely tax-free, and there are no required minimum distributions for the original owner.
That tax choice is the most important decision you will make about the account, and we weigh it fully in traditional vs Roth. See also where IRAs sit among all the options in types of retirement accounts.
How much you can contribute in 2026
In 2026 you can contribute up to $7,500 total across all your IRAs, plus a $1,100 catch-up if you are 50 or older, for $8,600 total. The limit is per person, not per account, so opening five IRAs does not let you save more; the cap covers them all combined.
You also need enough earned income, such as wages or self-employment income, to cover what you contribute. A nice feature is that you can usually contribute for a given tax year right up until the tax filing deadline the following spring, which gives you flexibility. The caps change most years; we cover them together in retirement contribution limits.
The income limits to watch
Two separate income rules can limit IRAs, and they often trip people up. For a Roth IRA, your ability to contribute directly phases out above certain income levels, so high earners may only be able to contribute a reduced amount, or nothing, directly. For a traditional IRA, anyone with earned income can contribute, but your deduction may shrink or vanish if you (or a spouse) are covered by a workplace plan and earn above set thresholds.
The exact figures change every year, so always check the current numbers at IRS.gov before you contribute. High earners shut out of a direct Roth sometimes use a strategy called a backdoor Roth, but the rules are tricky and worth professional input.
How an IRA differs from a 401(k)
The biggest differences are who opens it, how much you can save, and how much choice you get. A 401(k) is set up by your employer, often comes with a match, and lets you save much more: $24,500 in 2026 versus $7,500 for an IRA.
An IRA has no employer and no match, but it usually offers far more investment choice and lower fees than a workplace plan’s limited menu. That is why the two are complements, not rivals. A sensible order for many people is: contribute enough to the 401(k) to grab the full match, then fund an IRA, then go back and top up the 401(k). We lay out that sequence in how to start saving for retirement.
Who should open an IRA
Almost anyone with earned income can benefit from an IRA, and it is especially valuable if you lack a workplace plan or have already maxed your match. It is a natural home for an old 401(k) too: rolling a former employer’s plan into an IRA can cut fees and widen your choices, as we cover in 401(k) rollovers.
If you are self-employed, there are beefed-up versions like the SEP-IRA and SIMPLE IRA with much higher limits, which we cover in retirement plans for the self-employed. For a younger saver, a Roth IRA started early gives decades of tax-free growth, which is hard to beat.
How to open an IRA
Opening an IRA is quick: choose a low-cost brokerage, pick traditional or Roth, fund it, and invest. The steps are:
- Choose a provider: a reputable, low-cost brokerage or fund company. Verify it is registered through Investor.gov or FINRA BrokerCheck.
- Pick the type: traditional or Roth, based on the tax decision above.
- Fund it: transfer money from your bank, up to the annual limit.
- Invest the money: this is the step people forget. A common, costly mistake is funding the IRA but leaving the cash sitting uninvested. Many people choose a low-cost index fund or a target-date fund and leave it to grow.
Remember that invested money can lose value, so an IRA is for the long term. This is general information, not personalized advice; the free official resources are IRS.gov and Investor.gov, and for help suited to your situation see choosing a financial advisor. To see how an IRA fits with your other accounts, start at the retirement planning pillar.
References
- Roth IRAs, Internal Revenue Service.
- IRA limit increases to $7,500 for 2026, Internal Revenue Service.
- Retirement plans, Internal Revenue Service.
- Saving and investing, Investor.gov (SEC).
Frequently asked questions
How much can I contribute to an IRA in 2026?
In 2026 you can contribute up to $7,500 total across all your IRAs, whether traditional, Roth, or a mix of both. If you are 50 or older you can add a $1,100 catch-up contribution, bringing your total to $8,600. The limit is per person, not per account, so opening several IRAs does not raise how much you can put in. You also need enough earned income (such as wages) to cover the contribution.
What is the difference between a traditional and Roth IRA?
It is the same tax choice that runs through all retirement accounts. A traditional IRA may give you a tax deduction now, with withdrawals taxed as ordinary income in retirement. A Roth IRA gives you no deduction today, but qualified withdrawals are completely tax-free. The Roth IRA also has no required minimum distributions for the original owner. The right one depends on whether you expect a higher or lower tax rate in retirement; we compare them in detail in our traditional vs Roth guide.
What are the income limits for an IRA?
There are two different limits. For a Roth IRA, your ability to contribute directly phases out above certain income levels, so high earners may not be able to contribute the full amount, or anything, directly. For a traditional IRA, anyone with earned income can contribute, but your deduction may be reduced or eliminated if you (or your spouse) are covered by a workplace plan and earn above set thresholds. The exact figures change each year, so check IRS.gov for the current numbers.
How is an IRA different from a 401(k)?
A 401(k) is set up by your employer, often comes with a matching contribution, and has a much higher limit: $24,500 in 2026 versus $7,500 for an IRA. An IRA is opened by you at a brokerage with no employer involved, usually offering far more investment choices and lower fees. Many people use both: contribute enough to a 401(k) to get the full match, then fund an IRA for its wider choice, then return to the 401(k).
How do I open an IRA?
Choose a reputable, low-cost brokerage or fund company, decide between a traditional and Roth IRA, and open the account online; it usually takes a few minutes. Then fund it by transferring money from your bank and, importantly, actually invest the cash, often in a low-cost index fund or a target-date fund. A common mistake is funding an IRA but leaving the money sitting in cash, where it does not grow. Verify any firm you use is registered through Investor.gov or FINRA BrokerCheck.
Written by Linda Marsh. Reviewed byDaniel Brookfield, CFP®.
Our guides are written from personal experience and reviewed by a qualified financial professional for accuracy. Read our editorial policy.