About IRAs
Types of Individual Retirement Accounts
Traditional IRA’s in 2026
Traditional Individual Retirement Accounts (IRA) are personal retirement savings plans that may be tax-deductible depending on your income and whether you (or your spouse) are covered by a workplace retirement plan. In most circumstances, taxes on these accounts are deferred until withdrawals are taken. Withdrawals taken before age 59½ may incur a 10% early withdrawal penalty (with certain exceptions). Withdrawals taken after age 59½ are generally taxed at your ordinary income tax rate.
Required Minimum Distributions (RMDs): Traditional IRAs generally require annual withdrawals starting at age 73. Your first RMD is due by April 1 of the year after you reach age 73 (and you may have a second required withdrawal by December 31 of that same year if you delay the first).
Early Withdrawal Penalty Exemptions
- You have unreimbursed medical expenses that are more than 7.5% of your AGI.
- The distributions aren’t more than the cost of your medical insurance due to a period of unemployment.
- You are totally and permanently disabled.
- You are the beneficiary of a deceased IRA owner.
- You are receiving distributions in the form of an annuity.
- The distributions aren’t more than your qualified higher education expenses.
- You use the distributions to buy, build, or rebuild a first home.
- The distribution is due to an IRS levy of the IRA or retirement plan.
- The distribution is a qualified reservist distribution.
- The distribution is a qualified birth or adoption distribution.
2026 Traditional & Roth IRA Contribution Limits
- $7,500 per year (if you are under age 50)
- $8,600 per year (if you are age 50 or older, including the catch-up contribution)
- Your contribution generally can’t exceed your earned income for the year.
2026 Traditional IRA Tax Deduction Phaseouts
2026 Tax Deduction Limits for Traditional Individual Retirement Accounts (when you or your spouse is covered by a workplace plan)
- If you are single (or head of household) and covered by a workplace plan, the deduction phases out from $81,000 to $91,000 (MAGI).
- If you are married filing jointly and you are covered by a workplace plan, the deduction phases out from $129,000 to $149,000 (MAGI).
- If you are married filing jointly, you are not covered, but your spouse is covered, the deduction phases out from $242,000 to $252,000 (MAGI).
- If you are married filing separately and covered by a workplace plan, the deduction phases out from $0 to $10,000 (MAGI).
(If neither you nor your spouse is covered by a workplace retirement plan, you may be able to deduct the full contribution, subject to general rules.)
Roth IRA’s
Roth IRA’s are another type of Individual Retirement Account, however contributions are not tax deductible. They follow many of the same rules are Traditional IRA’s, but the primary benefit is distributions from Roth IRA’s after age 59 1/2 are not taxable. Realized gains are not taxed in these accounts so it allows your money to grow tax free over the life of the account.
2026 Roth IRA Income Limits (MAGI phaseouts)
- Single / Head of Household: $153,000 – $168,000
- Married Filing Jointly: $242,000 – $252,000
- Married Filing Separately: $0 – $10,00
SIMPLE IRA’s
A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a retirement plan designed for small businesses. It can be a great “middle ground” option: generally easier and cheaper to run than a 401(k), but with higher savings potential than a Traditional or Roth IRA alone.
Who it’s for: SIMPLE IRA plans are typically available to businesses with 100 or fewer employees (based on IRS rules).
How SIMPLE IRA contributions work
A SIMPLE IRA has two moving parts:
- Employee contributions (salary deferrals): employees choose how much to contribute through payroll.
- Employer contributions (required every year): the employer must contribute using one of these methods:
- Match up to 3% of compensation, or
- 2% nonelective contribution for each eligible employee (even if the employee doesn’t contribute).
Important detail: Under the 2% nonelective method, the 2% is generally calculated on compensation up to the annual compensation cap, which is $360,000 for 2026.
2026 SIMPLE IRA contribution limits
For 2026, the maximum employee contribution is:
- $17,000 (standard SIMPLE IRA deferral limit).
Some “applicable” SIMPLE plans (as defined under SECURE 2.0) allow a higher employee contribution limit:
- $18,100 for 2026.
2026 SIMPLE IRA catch-up contributions (age-based)
If you’re age 50+, the SIMPLE catch-up limit for 2026 is:
- $4,000 for most SIMPLE plans.
There are also SECURE 2.0 variations for certain SIMPLE plans (for example, a different catch-up limit that remains $3,850, and a higher age 60–63 catch-up that remains $5,250 for 2026).
SIMPLE IRA withdrawals and penalties
SIMPLE IRA withdrawals are generally taxed as ordinary income. If you take money out before age 59½, you may owe an additional 10% early withdrawal penalty. If you take a distribution within the first two years of participating in the SIMPLE IRA plan, that additional penalty can increase to 25%.
SIMPLE IRA pros and cons (quick view)
Pros
- Easy and relatively inexpensive to set up and maintain
- No annual nondiscrimination testing (in general)
- Employer contributions are straightforward and required
Cons
- No participant loans
- Lower contribution limits than many 401(k) designs
- Employer contributions are mandatory each year
SEP IRA’s
A SEP IRA (Simplified Employee Pension) is a retirement plan that’s often a strong fit for self-employed individuals and small business owners who want higher potential contributions with relatively simple administration. SEP IRA contributions are generally employer contributions—even when you’re the owner—so the amount you can contribute depends on compensation and IRS limits.
How SEP IRA contributions work
- Employers can contribute up to 25% of eligible compensation for each eligible employee, subject to annual IRS caps.
- If you’re self-employed, your SEP contribution is based on net earnings from self-employment (not gross revenue), using IRS rules that effectively make the “25% rule” look closer to ~20% in many simplified estimates. (The exact amount depends on your tax situation.)
2026 SEP IRA contribution limits
For 2026, SEP IRA contributions are limited to the lesser of:
- 25% of compensation, or
- $72,000 (annual additions limit). (irs.gov)
In addition, only the first $360,000 of compensation can be used in the calculation for 2026.
Eligibility basics
A SEP IRA can be established by a business of almost any size. If you have employees, the plan typically must cover employees who meet your plan’s eligibility requirements (within IRS rules), and employer contributions generally must be allocated consistently based on the plan’s formula.
Withdrawals and taxes
- Withdrawals are generally taxed as ordinary income.
- Withdrawals before age 59½ may be subject to a 10% early withdrawal penalty (with certain exceptions).
- SEP IRAs are subject to Required Minimum Distributions (RMDs), generally starting at age 73.
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Information gathered from IRS.gov, links below: