Written by the TaxPlain Editorial Team · Reviewed for accuracy · Last updated August 2026
⚠️ Educational only. TaxPlain does not provide tax, legal, or financial advice. Always consult a qualified tax professional about your specific situation.
What this is
An IRA, or Individual Retirement Arrangement, is a tax-advantaged account you open yourself to save for retirement — separate from any workplace plan your employer might offer, like a 401(k). Anyone with earned income can open one through a bank, brokerage, or robo-advisor, and choose how the money gets invested.
There are two main types: Traditional and Roth. The difference comes down to when you pay taxes. A Traditional IRA generally gets you a deduction now and taxes you on withdrawals later. A Roth IRA offers no upfront deduction, but qualified withdrawals in retirement are entirely tax-free.
"IRA" is often used loosely to mean the Traditional version specifically, while "Roth IRA" refers to its own account type. They share a combined annual contribution limit, but function very differently once tax season rolls around.
Unlike a workplace plan, an IRA isn't administered by your employer — you choose the custodian (a brokerage, bank, or robo-advisor) and control the underlying investments, whether that's index funds, individual stocks, bonds, or CDs. That flexibility is one of the main reasons people open an IRA even when they already have a 401(k): it typically offers a much wider menu of investment options than a workplace plan does.
Who it affects
✓ Applies to
Anyone with earned income who wants to save for retirement, with or without an employer plan.
↑ Also applies to
Self-employed workers, people between jobs, and high earners using a backdoor Roth strategy.
📅 CONTRIBUTION DEADLINE
Unlike a 401(k), where contributions must happen by December 31, IRA contributions for a given tax year can be made up until the tax filing deadline the following spring — typically mid-April. Filing an extension does not extend this deadline.
Traditional vs. Roth
Traditional IRA vs. Roth IRA
This is the comparison most people are actually searching for. Both accounts share the same 2026 contribution limit, but the tax mechanics — and who benefits most — are very different. For the full breakdown of Roth-specific rules, see our Roth IRA guide.
Traditional IRA — contributions may be tax-deductible depending on income and workplace coverage; the account grows tax-deferred, and withdrawals in retirement are taxed as ordinary income.
Roth IRA — funded with after-tax dollars, no deduction now, but qualified withdrawals in retirement are completely tax-free. See the Roth IRA guide for income limits and eligibility.
Income limits — Roth contributions phase out at higher incomes; Traditional IRA deductibility phases out only if you (or your spouse) are covered by a workplace retirement plan.
Required Minimum Distributions (RMDs) — Traditional IRAs require you to start withdrawing at age 73. Roth IRAs have no RMDs for the original owner.
Backdoor Roth — high earners who exceed Roth income limits can contribute to a Traditional IRA, then convert those funds to a Roth, typically reported on Form 8606. This strategy has no income limit itself, which is why it's become a common workaround, though it carries its own tax nuances if you hold other pre-tax IRA balances.
Combined limit — the annual contribution limit applies across all your IRAs combined, whether you split contributions between Traditional and Roth or put everything in one.
Secondary comparison
IRA vs. 401(k)
These aren't either/or. Most people who have access to both can — and often should — contribute to each. Here's how they differ. See our 401(k) guide for employer-plan specifics.
IRA
Opened individually, not tied to an employer. Wider investment choice. 2026 limit: $7,500 ($8,600 if 50+). Contribution deadline is tax filing day.
401(k)
Offered through an employer, often with a matching contribution. 2026 limit: $24,500 ($32,500 if 50+). Contributions must be made by December 31.
Related forms often involved
A handful of IRS forms tend to show up alongside IRA activity, especially around contributions, conversions, and distributions. Knowing which one applies to your situation can save a confused phone call to your custodian come tax season.
Form 5498 — sent by your IRA custodian reporting contributions made for the year; informational only, not filed with your return.
Form 1099-R — reports any distributions or withdrawals taken from your IRA during the year.
Form 8606 — required for nondeductible Traditional IRA contributions and backdoor Roth conversions; skipping this is one of the most common IRA paperwork mistakes.
Form 1040 — where any Traditional IRA deduction gets claimed. See our 1040 guide for where this lands on your return.
Common mistakes to avoid
⚠️ DEADLINE CONFUSION
Many people assume IRA contributions must happen by December 31, like a 401(k). You actually have until the tax filing deadline the following spring to contribute for the prior year.
⚠️ EXCEEDING THE COMBINED LIMIT
The contribution limit applies across all your IRAs combined. Contributing the max to both a Traditional and Roth IRA in the same year triggers an excess-contribution penalty if not corrected in time.
What to do right now
If you don't already have an IRA, decide between Traditional and Roth based on whether you expect your tax rate to be higher now or in retirement. If you're weighing this against maxing out a 401(k) first, prioritize any employer match before funding an IRA — that match is free money that an IRA can't replicate. If you're self-employed with no workplace plan at all, an IRA is often the simplest starting point before looking into a SEP or Solo 401(k).
Questions to ask your tax professional
01Based on my income, is a Traditional or Roth IRA more advantageous for me this year?
02Am I eligible to deduct Traditional IRA contributions given my workplace coverage?
03Does a backdoor Roth strategy make sense for my income level?
04How should I split contributions between my IRA and my 401(k) this year?
05Do I need to file Form 8606 based on my recent contributions?
Frequently asked questions
What's the difference between a Traditional IRA and a Roth IRA?
A Traditional IRA is funded with pre-tax or deductible dollars, grows tax-deferred, and is taxed when you withdraw in retirement. A Roth IRA is funded with after-tax dollars, and qualified withdrawals in retirement are completely tax-free.
What is a backdoor Roth IRA?
A backdoor Roth IRA is a strategy for high earners who exceed Roth income limits. You contribute to a Traditional IRA (which has no income limit for contributions) and then convert those funds to a Roth IRA, usually reported on Form 8606.
What is a Required Minimum Distribution (RMD)?
An RMD is the minimum amount the IRS requires you to withdraw each year from a Traditional IRA once you reach age 73. Roth IRAs have no RMDs for the original account owner.
What's the 2026 IRA contribution limit?
For 2026, the IRA contribution limit is $7,500, up from $7,000 in 2025. If you're 50 or older, you can add a $1,100 catch-up contribution, for a total of $8,600.
Can I contribute to both an IRA and a 401(k)?
Yes. IRAs and 401(k)s have separate contribution limits, so you can fund both in the same year, subject to each account's own rules and any income-based limits on IRA deductibility or Roth eligibility.