Every retirement account offers a deal with the IRS. A traditional 401(k) or IRA says: skip the tax now, pay it later. A Roth IRA flips it: pay the tax now, and never again. For 2026, you can put up to $7,500 into that second deal, $8,600 if you are 50 or older, provided your income qualifies.
Those limits are new this year. In November 2025, the IRS raised the IRA contribution limit to $7,500, up from $7,000, and lifted the age-50 catch-up to $1,100. The full set of 2026 numbers is in IRS Notice 2025-67. Here is how the account works, who can use it, and how to get one open this week.
The trade at the heart of a Roth
Contributions to a Roth IRA are made with money you have already paid tax on. There is no deduction today. In exchange, the account grows tax-free, and qualified withdrawals in retirement, generally after age 59½ and once the account has been open five years, are completely tax-free: contributions, decades of growth, all of it. The IRS spells out the mechanics on its Roth IRA page.
Two features make the Roth unusually forgiving. Your direct contributions, though not the earnings on them, can be withdrawn at any time, at any age, without tax or penalty, because you already paid tax on that money. And unlike traditional IRAs, a Roth has no required minimum distributions during the original owner’s lifetime, so money you never need can keep compounding untouched.
Who qualifies: the two tests
First, you need compensation, meaning wages, salary, self-employment earnings, or similar. Investment income and Social Security benefits do not count. You can never contribute more than you earned for the year, so a retiree with no work income generally cannot contribute, though a working spouse can fund a spousal Roth IRA for a non-working spouse if the couple files jointly. There is no age limit; a 75-year-old with part-time wages can contribute.
Second, your modified adjusted gross income must fall under the year’s ceiling. For 2026, per Notice 2025-67, the ability to contribute phases out between $153,000 and $168,000 of modified AGI for single filers and heads of household, and between $242,000 and $252,000 for married couples filing jointly. Below the bottom of your range, you can contribute the full amount; inside the range, a reduced amount; above the top, nothing directly. (Married filing separately faces a harsh $0 to $10,000 range.) The IRS worksheet for the reduced amount is in its IRA contribution limit rules.
Note that these ceilings apply to Roth IRA contributions only. If your workplace 401(k) offers a Roth option, that has no income limit at all.
Roth or traditional: a one-question shortcut
The core question is whether your tax rate is higher now or will be higher in retirement. Early-career workers in low brackets usually get more from a Roth, since they pay today’s small tax and escape tomorrow’s bigger one. Peak earners often prefer the traditional deduction. Many savers reasonably split the difference. A Roth also buys certainty: whatever Congress does to tax rates later, your qualified withdrawals stay tax-free, and tax-free withdrawals do not count in the formula that determines how much of your Social Security is taxable.
How to open one this week
Opening a Roth IRA takes about fifteen minutes at any major brokerage, mutual fund company, bank, or credit union. You will need your Social Security number, a linked bank account, and a beneficiary designation, which is worth five minutes of real thought, since it overrides your will for this account.
Then make the two decisions that actually matter. How much: anything up to the limit helps, and automatic monthly transfers, say $100 to $625 a month, beat a once-a-year scramble. What to buy: a contribution sitting in cash is a common and costly mistake; the money must be invested, and low-cost broad index funds or a target-date fund matching your expected retirement year are the standard starting points. If you prefer zero market risk, banks offer IRA certificates of deposit, though long horizons usually argue for owning at least some stocks.
Deadlines and fine print worth knowing
Contributions for a given tax year can be made until the following April’s filing deadline, so 2026 contributions are allowed until mid-April 2027. Contributing more than your limit triggers a 6 percent excise tax for each year the excess stays in, so high earners near the phase-out should check their numbers before funding. Lower-income savers get a bonus: Roth contributions can qualify for the Saver’s Credit, a tax credit worth up to half the first $2,000 contributed, subject to income limits we covered in an earlier piece.
The Roth IRA is one of the few genuinely simple deals in the tax code: pay tax on the seed, never on the harvest. For 2026 the seed can be $7,500. The only step that compounds is the first one.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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