The Right IRA Can Save You Thousands in Taxes
For 2026, you can contribute up to $7,000 to an IRA — or $8,000 if you are 50 or older. A Traditional IRA contribution is tax-deductible, meaning it directly reduces the income you owe taxes on this year. A Roth IRA skips the upfront deduction but lets your money grow and come out completely tax-free in retirement. Either way, an IRA is one of the most powerful tools in the tax code for everyday savers.
Traditional IRA vs. Roth IRA
Traditional IRA
- Contributions may be tax-deductible the year you make them
- Money grows tax-deferred — no taxes on gains until withdrawal
- Withdrawals in retirement are taxed as ordinary income
- Required minimum distributions (RMDs) start at age 73
- Best if you expect to be in a lower tax bracket in retirement
Roth IRA
- Contributions are made with after-tax dollars — no deduction now
- Money grows tax-free — and withdrawals are tax-free in retirement
- No required minimum distributions during your lifetime
- Can withdraw contributions (not earnings) at any time without penalty
- Best if you expect to be in the same or higher bracket in retirement
Best IRA Accounts for 2026
We compared fees, investment options, and standout features across the most popular IRA providers. All eight offer both Traditional and Roth IRAs.
Fidelity
$0
$0
Most people
Investment options: Stocks, ETFs, mutual funds (3,300+ no-transaction-fee), bonds, CDs, options
Key feature: 3,300+ no-transaction-fee mutual funds, fractional shares, zero-expense-ratio index funds
Charles Schwab
$0
$0
Research-oriented investors
Investment options: Stocks, ETFs, mutual funds, bonds, CDs, options, futures
Key feature: Top-rated research tools, Schwab Intelligent Portfolios (free robo-advisor)
Vanguard
$0 for most accounts
$0 for brokerage IRA
Buy-and-hold index investors
Investment options: Stocks, ETFs, Vanguard mutual funds, bonds, CDs
Key feature: Pioneered low-cost index investing, investor-owned structure keeps costs low
SoFi Invest
$0
$0
Beginners who want a bonus
Investment options: Stocks, ETFs, crypto (in taxable accounts)
Key feature: 1% match on IRA contributions deposited as a bonus into your account
Betterment
0.25% annually
$0
Hands-off investors
Investment options: Automated portfolio of ETFs
Key feature: Automated tax-loss harvesting, goal-based investing, auto-rebalancing
Wealthfront
0.25% annually
$500
Tech-savvy hands-off investors
Investment options: Automated portfolio of ETFs, direct indexing at $100K+
Key feature: Automated tax-loss harvesting, direct indexing for larger accounts, financial planning tools
E*TRADE
$0
$0
Active traders
Investment options: Stocks, ETFs, mutual funds, bonds, options, futures
Key feature: Power E*TRADE platform for active trading, extensive options tools and analysis
Merrill Edge
$0
$0
Bank of America customers
Investment options: Stocks, ETFs, mutual funds, bonds, options
Key feature: Preferred Rewards integration — earn bonus credit card rewards and rate boosts with BofA
Tax Benefits Explained
Traditional IRA Deduction
When you contribute to a Traditional IRA, you can deduct that amount from your taxable income. Your tax savings equal your contribution multiplied by your marginal tax rate. For example, if you contribute $7,000 and you are in the 22% bracket, you save $1,540 on your federal tax bill. The money grows tax-deferred, and you pay income tax only when you withdraw in retirement.
Roth IRA Tax-Free Growth
Roth IRA contributions do not reduce your taxable income this year. Instead, the payoff comes later: all growth and qualified withdrawals in retirement are completely tax-free. If your account grows from $100,000 to $500,000 over 30 years, you pay zero tax on that $400,000 in gains. You also avoid required minimum distributions, giving you more control over your retirement income.
Which Is Better?
The answer depends on whether your tax rate is higher now or will be higher in retirement. If you are early in your career and expect your income to rise, a Roth IRA is usually the better choice — you pay a low tax rate now and avoid a higher rate later. If you are in your peak earning years and expect to drop to a lower bracket in retirement, the Traditional IRA deduction saves you more. When in doubt, splitting contributions between both types provides flexibility.
Income Limits for Roth IRA Contributions (2026)
You can make a full Roth IRA contribution if your modified adjusted gross income (MAGI) is below $150,000 (single) or $228,000 (married filing jointly). Contributions phase out between $150,000 and $161,000 for single filers and between $228,000 and $240,000 for MFJ. Above those limits, you cannot contribute directly — but a backdoor Roth IRA strategy may still be available.
Traditional IRA Deduction Income Limits (If Covered by Employer Plan)
If you or your spouse are covered by a retirement plan at work (like a 401k), the Traditional IRA deduction phases out at certain income levels. For 2026, single filers covered by a workplace plan can fully deduct IRA contributions if their MAGI is below $79,000 (phase-out ends at $89,000). For MFJ where the contributing spouse has a plan, the range is $126,000 to $146,000. If your spouse has a plan but you do not, the range is $236,000 to $246,000. If neither spouse is covered by a workplace plan, there is no income limit — the full contribution is deductible regardless of income.
How Much Could an IRA Save You in Taxes?
These examples show the federal income tax savings from a fully deductible Traditional IRA contribution for the 2026 tax year. Actual savings depend on your total taxable income and filing status.
| Scenario | Income | Tax Bracket | IRA Contribution | Tax Saved |
|---|---|---|---|---|
| Single filer, entry-level | $45,000 | 12% | $7,000 | $840 |
| Single filer, mid-career | $85,000 | 22% | $7,000 | $1,540 |
| Married filing jointly | $150,000 | 22% | $14,000 (both spouses) | $3,080 |
| Single filer, age 55 | $110,000 | 24% | $8,000 (catch-up) | $1,920 |
| Married filing jointly, both 50+ | $200,000 | 24% | $16,000 (both spouses) | $3,840 |
Read our IRA Tax Deduction Guide for a full breakdown of deduction rules, income limits, and strategies for maximizing your savings.
Frequently Asked Questions
What is the IRA contribution limit for 2026?
The IRA contribution limit for 2026 is $7,000 for those under 50 and $8,000 for those 50 and older. This limit applies to the combined total of all your Traditional and Roth IRA contributions for the year.
Should I open a Traditional IRA or a Roth IRA?
It depends on your current and expected future tax rate. If you expect to be in a lower tax bracket in retirement, a Traditional IRA gives you a tax break now. If you expect to be in the same or higher bracket, a Roth IRA lets your money grow and be withdrawn tax-free in retirement.
What is the income limit for Roth IRA contributions in 2026?
For 2026, single filers can contribute the full amount to a Roth IRA if their modified adjusted gross income (MAGI) is below $150,000. Contributions phase out between $150,000 and $161,000. For married filing jointly, the phase-out range is $228,000 to $240,000.
Can I contribute to both a Traditional IRA and a Roth IRA?
Yes, you can contribute to both a Traditional and a Roth IRA in the same year, but your combined contributions cannot exceed the annual limit ($7,000 under 50, $8,000 age 50+). For example, you could put $4,000 in a Traditional IRA and $3,000 in a Roth IRA.
When is the deadline to contribute to an IRA for 2026?
You have until April 15, 2027 to make IRA contributions for the 2026 tax year. This applies to both Traditional and Roth IRA contributions. Just make sure to designate the contribution as being for the 2026 tax year when you make it.
What is a backdoor Roth IRA?
A backdoor Roth IRA is a strategy for high earners who exceed the Roth IRA income limits. You contribute to a Traditional IRA (non-deductible) and then convert those funds to a Roth IRA. There is no income limit on conversions, so this effectively lets anyone fund a Roth IRA regardless of income.
Need Help Choosing the Right IRA?
The difference between a Traditional and Roth IRA can mean thousands of dollars over your lifetime. A qualified tax professional can analyze your income, tax bracket, and retirement goals to recommend the right account for you.
Talk to a Tax ProThis page is for informational purposes only and does not constitute tax, legal, or financial advice. IRA contribution limits, income thresholds, and tax rules are based on IRS guidelines for the 2026 tax year. Consult a qualified tax professional for guidance specific to your situation.