If you’re confused about IRA rules, you’re not alone.
Over the years, I’ve spoken with many people who aren’t sure whether they qualify for a Roth IRA, whether their traditional IRA contributions are deductible, or how catch-up contributions work after age 50. The rules can feel overwhelming, especially as income limits and contribution thresholds change from year to year.
But understanding how IRAs work doesn’t have to be complicated.
With 2026 contribution limits increasing and the April 15, 2026, deadline approaching for 2025 contributions, now is a good time to revisit the basics. Whether you’re just starting to save or looking to maximize contributions in your 50s and 60s, knowing the rules helps you make thoughtful, informed decisions.
At Allegiant Wealth Strategies, we guide clients through these decisions every day. While everyone’s financial situation is unique, the foundational IRA rules apply to all of us.
Let’s walk through what you need to know.
What can you invest in under IRA rules?
One of the first questions people ask is: “What can I put in my IRA?”
The good news is that IRA rules allow you to invest in a wide range of assets. Most people use their IRAs to invest in:
- Mutual funds – Professionally managed portfolios
- Exchange-traded funds (ETFs) – Diversified, low-cost index funds
- Stocks – Individual company shares
- Bonds – Corporate or government bonds
- Certificates of deposit (CDs) – Fixed-rate savings products
These traditional investments allow you to build a diversified portfolio, and working with a financial advisor like Allegiant Wealth Strategies can help you adjust your strategy as your goals and risk tolerance change over time. You can schedule a complimentary, no-obligation consultation by calling 269-218-2100 or contacting us here.
You may have heard about self-directed IRAs, which allow you to invest in alternative assets such as real estate, precious metals, or private equity. While these options exist, they come with additional complexity.
Self-directed IRAs require specialized custodians, more administrative oversight, and strict adherence to IRS rules – mainly around prohibited transactions and personal use. Mistakes can trigger taxes and penalties, which can undermine the tax advantages that make IRAs so valuable in the first place.
For most investors, a diversified portfolio of stocks, bonds, and mutual funds inside a traditional or Roth IRA provides ample flexibility without the added administrative burden. If you’re considering alternative investments, it’s wise to consult with both a financial advisor and a tax professional before moving forward.
What IRA rules say you can’t invest in
IRA rules also include restrictions. You cannot use your IRA to invest in:
- Collectibles – This includes art, antiques, gems, stamps, coins (with some exceptions for certain gold and silver coins), and alcoholic beverages
- Life insurance – Your IRA can’t hold life insurance policies
- Personal-use real estate – You can’t buy a vacation home or your primary residence with IRA funds
These restrictions exist to prevent you from using your tax-advantaged retirement account for personal benefit before retirement.
If you’re considering alternative investments through a self-directed IRA, I strongly recommend consulting with a financial advisor and a tax professional first. The rules are complicated, and mistakes can be costly.
IRA Rules for deducting traditional IRA contributions
One of the primary benefits of a traditional IRA is the potential tax deduction. In many cases, you can deduct your contribution from your taxable income. But whether you qualify depends on two factors: your income and whether you’re covered by a retirement plan at work.
What does “covered by a workplace plan” mean?
You’re considered covered if you participate in a 401(k), 403(b), pension, or similar employer-sponsored plan. Even if you didn’t contribute during the year, you may still be classified as covered.
Not sure? Check Box 13 on your W-2. If the “Retirement Plan” box is marked, you’re covered.
If you’re covered by a workplace plan
If you have access to a retirement plan at work, your ability to deduct traditional IRA contributions phases out at higher income levels.
For 2026:
Single or Head of Household:
- Full deduction if your MAGI is $81,000 or less
- Partial deduction between $81,000 and $91,000
- No deduction above $91,000
Married Filing Jointly:
- Full deduction if your MAGI is $129,000 or less
- Partial deduction between $129,000 and $149,000
- No deduction above $149,000
Even if your income is too high for a deduction, you can still contribute to a traditional IRA. The money will continue to grow tax-deferred.
If you’re not covered (but your spouse is)
If you’re married filing jointly, and your spouse is covered by a workplace plan, your deduction begins phasing out once your combined MAGI reaches $242,000 and is eliminated at $252,000.
If neither spouse is covered
If neither you nor your spouse participates in a workplace retirement plan, your traditional IRA contribution is fully deductible regardless of income.
Roth IRA rules: Income limits and key differences
Unlike traditional IRAs, Roth IRAs have income limits that determine whether you can contribute directly. If your income exceeds certain thresholds, you may not be eligible to contribute.
The tradeoff is straightforward: Roth IRA contributions are made with after-tax dollars, so you don’t receive a deduction today. In exchange, qualified withdrawals in retirement, including investment growth, are tax-free.
For those who expect to be in a higher tax bracket later, or who value tax diversification in retirement, this structure can be appealing.
For a deeper look at Roth vs traditional IRAs, please read “Roth IRA vs Traditional IRA: How to Choose the Right One for You.”
2026 Roth IRA Income Limits
For 2026, eligibility phases out at the following Modified Adjusted Gross Income (MAGI) levels:
Single or Head of Household:
- Full contribution if your MAGI is less than $153,000
- Partial contribution between $153,000 and $168,000
- No contribution allowed above $168,000
Married Filing Jointly:
- Full contribution if your MAGI is less than $242,000
- Partial contribution between $242,000 and $252,000
- No contribution allowed above $252,000
Married Filing Separately:
- Partial contribution if your MAGI is between $0 and $10,000
- No contribution above $10,000
If your income falls in the phase-out range, you can still contribute a reduced amount based on IRS calculations.
What if your income is too high?
If your income exceeds Roth IRA limits, you may still have options. Some higher-income earners consider a strategy commonly referred to as a “backdoor Roth IRA,” which involves contributing to a traditional IRA and then converting those funds to a Roth.
However, this approach must be handled carefully. The IRS pro rata rule applies if you have other pre-tax IRA balances, which can affect the taxable portion of the conversion. Because of these complexities, it’s wise to consult a financial advisor and tax professional before implementing this strategy.
Given these tax implications, I strongly recommend working with both a financial advisor and a tax professional before proceeding with a backdoor Roth IRA.
Catch-up contributions: How to boost retirement savings after 50
Once you turn 50, IRA rules allow you to contribute more than the standard limit. These catch-up contributions are designed to help you accelerate your retirement savings during your peak earning years.
FYI: Catch-up contributions also apply to workplace retirement plans like 401(k)s and 403(b)s, where the catch-up amounts are even higher. But since this guide focuses on IRAs, we’re covering the IRA-specific rules here.
2026 IRA contribution limits
For 2026, here’s what you can contribute:
- Under age 50: $7,500
- Age 50 and older: $8,500 (that’s the $7,500 base limit plus a $1,000 catch-up contribution)
These limits increased from 2025, when the contribution limits were $7,000 for those under 50 and $8,000 for those 50 and older.
Don’t forget: You can still contribute for 2025
You have until April 15, 2026, to make IRA contributions for the 2025 tax year. So, if you haven’t maxed out your 2025 contributions yet, you still have time. For 2025, the limits are $7,000 if you’re under 50, or $8,000 if you’re 50 or older.
Why catch-up contributions matter
That extra $1,000 per year might not sound like much, but it adds up over time. Here’s why catch-up contributions can make a real difference:
- Helps close the retirement savings gap – If you started saving late or took time off from the workforce, catch-up contributions give you a chance to make up ground.
- Takes advantage of peak earning years – Many people earn more in their 50s and 60s than at any other time in their careers. Catch-up contributions let you put more of that income toward retirement.
- Maximizes your final years of saving – The 10 to 15 years before retirement are critical for building your nest egg. Catch-up contributions help you make the most of this window.
Whether you’re on track with your retirement goals or playing catch-up, contributing the maximum amount allowed can significantly impact your financial security in retirement.
IRA rules for maximizing your IRA
Now that you understand the basics, here are a few additional strategies to help you make the most of your IRA.
You need earned income to contribute
IRA contributions require earned income. This includes wages, salaries, tips, bonuses, and self-employment income. Investment income, Social Security benefits, and pension payments don’t count as earned income for IRA purposes.
If you’re married and one spouse doesn’t work, you can still contribute to a spousal IRA for the non-working spouse if the working spouse has enough earned income to cover both contributions.
Traditional IRA contributions can lower your tax bill
When you contribute to a traditional IRA and claim the deduction, you’re reducing your taxable income for the year. This can have a ripple effect on other parts of your tax return. A lower adjusted gross income might make you eligible for other tax credits or deductions, or it could reduce how much you pay in taxes on Social Security benefits.
Timing matters
You don’t have to make your full IRA contribution in one lump sum. Many people find it easier to contribute throughout the year, whether that’s monthly or quarterly. This approach spreads out the financial impact and can help you take advantage of dollar-cost averaging, which involves buying investments at different price points over time.
Just remember: For 2025 contributions, the deadline is April 15, 2026. For 2026 contributions, you have until April 15, 2027.
A note on workplace plan catch-ups
If you have a 401(k) or 403(b) through work and you earned over $150,000 in 2025, there’s a new rule that affects your 2026 catch-up contributions. Under the SECURE 2.0 Act, catch-up contributions must be made to a Roth account if your plan offers one. This rule only applies to workplace retirement plans, not to IRAs.
Work with a professional
IRA rules can get complicated, especially when you’re trying to figure out MAGI calculations, deductibility limits, and how your contributions fit into your overall financial plan. At Allegiant Wealth Strategies, we help clients navigate these decisions every day.
Whether you’re trying to decide between a traditional or Roth IRA, or you’re wondering how to maximize your contributions, working with a financial advisor can give you clarity and confidence. You can schedule a free, no-obligation consultation with us at Allegiant Wealth Strategies by calling 269-218-2100 or contacting us here.
Simplify and act
IRAs offer a powerful way to save for retirement with real tax benefits. Whether you’re just getting started or you’re in your peak earning years and making catch-up contributions, understanding these IRA rules helps you make informed decisions about your financial future.
The key points to remember: You can contribute to a traditional IRA regardless of income, but your ability to deduct those contributions on your taxes depends on your income and whether you (or your spouse) are covered by a workplace retirement plan. Roth IRAs have income limits, but they offer tax-free withdrawals in retirement. And once you turn 50, you can contribute more through catch-up contributions.
Don’t forget that you still have until April 15, 2026, to make IRA contributions for the 2025 tax year. If you haven’t maxed out your contributions yet, there’s still time to take advantage of those tax benefits.
If you’re feeling uncertain about which IRA is right for you, or you’re not sure how IRA contributions fit into your overall retirement strategy, you don’t have to figure it out alone. At Allegiant Wealth Strategies, we help people navigate these decisions every day. We’ll take the time to understand your situation, explain your options clearly, and help you create a plan that works for your goals.
Ready to take the next step? Schedule a complimentary consultation with us today. You can reach us at (269) 218-2100 or via our website.
Your retirement savings deserve a clear strategy. Let’s build one together.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend that you consult a tax preparer, professional tax advisor, or lawyer.
Some IRAs have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
Link to blog "Roth IRA vs Traditional IRA: How to Choose the Right One for You"