What is a Traditional IRA?

A Traditional IRA (Individual Retirement Account) is a retirement account you open yourself, where contributions may be tax-deductible, investments grow without annual taxes, and withdrawals in retirement are taxed as ordinary income. It is the tax-deferred counterpart to a Roth IRA, which reverses the order by taxing money going in and leaving qualified withdrawals tax-free.

Anyone with earned income can contribute. Whether you can deduct that contribution is a separate question, and it depends on your income and whether you or your spouse are covered by a retirement plan at work. Confusing the two is the most common mistake people make with this account.

Traditional IRA vs. Roth IRA

The choice comes down to when you pay tax: now or later.

The usual framing is that a Traditional IRA wins if your tax rate in retirement will be lower than it is today, and a Roth wins if it will be higher. That is a reasonable starting point, though it leaves out two things. Roth accounts have no required minimum distributions, which gives you more control over your taxable income later in life. And traditional balances can be converted to Roth during low-income years, a lever you only have if you built a traditional balance first.

Traditional IRA Income Limits for 2026

There is no income limit on contributing to a Traditional IRA. There is an income limit on deducting the contribution, and it applies only if you or your spouse are covered by a workplace retirement plan.

For 2026, the deduction phases out across these modified adjusted gross income (MAGI) ranges:

Below the bottom of a range the contribution is fully deductible, above the top none of it is, and in between the deduction phases out proportionally. If neither you nor your spouse is covered by a workplace plan, the deduction is available at any income.

Contributing without a deduction is still allowed. The nondeductible basis that creates is what makes a backdoor Roth IRA possible, though only cleanly if you hold no other pre-tax IRA money. See the pro-rata rule below.

Traditional IRA Contribution Limits

For 2026 you can contribute $7,500, or $8,600 if you are 50 or older, which includes a $1,100 catch-up. That limit is shared across all of your IRAs combined, traditional and Roth together, rather than applying to each account.

Two constraints are easy to miss. You cannot contribute more than your earned income for the year, so $5,000 of side income caps the contribution at $5,000. And a spouse with little or no earnings of their own can still contribute through a spousal IRA on the strength of household income.

Contributions for a given tax year can be made up until that year’s April filing deadline.

Withdrawals, Penalties, and RMDs

The taxable portion of a withdrawal is taxed as ordinary income at your marginal rate, not at the lower long-term capital gains rates. Any nondeductible basis you built comes back out tax-free, spread proportionally across withdrawals. Take money out before age 59.5 and a 10% early withdrawal penalty applies on top of the tax, with exceptions including a first-time home purchase up to a $10,000 lifetime limit, qualified higher education expenses, certain medical costs, and 72(t) substantially equal periodic payments.

Required minimum distributions (RMDs) begin at age 73 if you were born between 1951 and 1959, and at age 75 if you were born in 1960 or later. The amount is your prior year-end balance divided by a life expectancy factor from IRS tables. Missing one carries a penalty of 25% of the shortfall, reduced to 10% if you correct it promptly.

RMDs are the reason a large traditional balance can turn into a tax problem late in retirement, when forced withdrawals stack on top of Social Security and can raise Medicare premiums. To see whether converting in lower-income years would reduce your lifetime tax, you can model Roth conversions in ProjectionLab’s tax optimizer.

Traditional IRA vs. 401(k)

Both accounts are tax-deferred, but they are not the same thing.

A 401(k) comes through an employer, often carries a match, and holds far more: $24,500 in 2026 against the IRA’s $7,500. A Traditional IRA you open yourself at any brokerage, and it usually offers a much wider investment menu than a 401(k)'s fixed lineup.

Most people end up using both. Capturing the full employer match first is close to universal advice, since it is an immediate return on the contribution. What comes after that varies with your circumstances: IRA deductibility, Roth eligibility, whether an HSA is available, plan fees, and the pro-rata rule can all reorder the priorities.

Frequently Asked Questions

Is a rollover IRA the same as a Traditional IRA? Yes. A rollover IRA is a Traditional IRA that happens to have been funded by a transfer from an employer plan rather than by direct contributions. Tax treatment, contribution limits, and withdrawal rules are identical. The separate label is mostly bookkeeping, though some people keep rollover money in its own account to preserve the option of moving it into a future employer’s plan.

Can I contribute to a Traditional IRA and a 401(k) in the same year? Yes, and the limits are separate, so 2026 allows $7,500 to an IRA and $24,500 to a 401(k). Rolling money from a 401(k) into an IRA does not count against either figure, since a rollover is not a contribution. Being covered by the 401(k) is what may reduce or eliminate your IRA deduction, but it never blocks the contribution itself.

How do I convert a Traditional IRA to a Roth without paying taxes? For most people there is no way to avoid the tax entirely, because converting means recognizing the pre-tax balance as income in the year you convert. Converting nondeductible contributions is only partly an exception, because of the pro-rata rule. Form 8606 treats all of your traditional, SEP, and SIMPLE IRAs as one pool, measured at year-end. If 90% of that pool is pre-tax, then 90% of any conversion is taxable no matter which dollars you moved. Someone with $7,500 of nondeductible basis and a $67,500 rollover IRA cannot convert the $7,500 tax-free; they owe tax on 90% of it.

What you can control is when you pay. Converting during a low-income year, such as a gap between jobs or the years between retiring and claiming Social Security, moves the same dollars through lower brackets. Rolling pre-tax IRA money into an employer 401(k) first, where it is excluded from the pro-rata calculation, is the usual way to clear the pool before converting.

What happens to my Traditional IRA when I die? It passes to your named beneficiaries and bypasses your will entirely. Most non-spouse beneficiaries have to empty the account within 10 years under the SECURE Act, and those withdrawals are taxable to them. If you die on or after your required beginning date for distributions, many of those beneficiaries also have to take an annual distribution in years one through nine rather than waiting until year ten. A surviving spouse has more options, including treating the account as their own. See inherited IRA for the details.

Is a Traditional IRA worth it if I cannot deduct the contribution? Sometimes. Nondeductible contributions still grow tax-deferred, and they create the basis a backdoor Roth needs. But if a backdoor Roth is not part of your plan and you are above the deduction range, a taxable brokerage account may suit you better, since long-term gains there are taxed at capital gains rates rather than as ordinary income.