Retirement
beginner · $0 - $50K
Contribute after-tax dollars that grow tax-free.
Once you are 59.5 and the account has been open at least 5 years, qualified withdrawals are tax-free.
A $7,500 contribution at age 22 growing at 8% = $170,000+ by age 65.
Same contribution at 35 = $78,000 - a difference that comes almost entirely from the extra years of compounding.
Only about 26% of US households have a Roth IRA.
Annual Limit
$7,500 ($8,600 if 50+) - 2026
Key takeaways
- You contribute after-tax dollars, and qualified withdrawals in retirement (age 59.5 and the account open at least 5 years) are tax-free.
- Contributions (not earnings) can be withdrawn at any time without tax or penalty, which adds flexibility.
- The 2026 limit is $7,500 ($8,600 if 50+); direct contributions phase out at $153K-$168K single / $242K-$252K married.
- Above the income limits, the Backdoor Roth reaches the same result.
Requirements
- Earned income equal to or greater than contribution
- Income under $168K single / $252K married for direct contribution (2026). Partial contributions allowed between $153K-$168K single / $242K-$252K married. If income is higher, use Backdoor Roth strategy.
How to Implement
- 1Open a Roth IRA at a brokerage that offers one
- 2Set up automatic monthly contributions
- 3Choose investments within the account (low-cost index and target-date funds are common options)
- 4Contribute up to $7,500/year ($8,600 if 50+) for 2026
The bottom line
A Roth IRA trades a tax break today for tax-free income later. Whether it fits often comes down to whether you expect your tax rate in retirement to be higher or lower than it is now.
Frequently Asked Questions
Understanding IRA Types: Employer vs Individual
Many people don't realize you can contribute to BOTH a workplace retirement plan AND an individual IRA. That's up to $32,000/year in tax-advantaged savings!
| Account Type | Contribution | Through | 2026 Limit | Catch-up |
|---|---|---|---|---|
Employer 401(k) | Pre-tax | Employer | $24,500 | +$8,000 (50+) +$11,250 (60-63) |
Roth 401(k) | After-tax | Employer | $24,500 | +$8,000 (50+) +$11,250 (60-63) |
Traditional IRA | Pre-tax | Individual | $7,500 | +$1,100 (50+) |
Roth IRA | After-tax | Individual | $7,500 | +$1,100 (50+) |
The limits are separate - a 401(k) and an IRA can be funded in the same year
If you have access to a 401(k) at work, you can still contribute to a Traditional or Roth IRA on your own. Combined, that's $32,000 in annual tax-advantaged contributions (before catch-up).
High Earner? You Have Options!
If your income exceeds Roth IRA limits ($168,000 single / $252,000 married):
- Backdoor Roth IRA - Contribute to Traditional IRA, then convert to Roth
- Mega Backdoor Roth - Add up to $47,500+ more via after-tax 401(k)
44%
of US households own IRAs
16%
of households contribute annually
26%
own Roth IRAs specifically
74%
have some tax-advantaged savings
Featured Providers
- Fidelity
- Vanguard
- Schwab
Related retirement strategies
Sources
- Internal Revenue Service, Rev. Proc. 2025-32
2026 inflation-adjusted amounts (tax brackets, standard deduction, estate & gift, FSA, credits)
- Internal Revenue Service, Notice 2025-67
2026 retirement plan limits (401(k), IRA, SIMPLE, catch-up)
- Internal Revenue Service, Rev. Proc. 2025-19
2026 HSA and HDHP inflation-adjusted limits
Educational information only. Not financial, tax, or legal advice or a recommendation. Figures are drawn from the primary sources cited above; verify current amounts with the source before acting.