This is not investment advice. The information provided is for educational and informational purposes only and does not constitute a recommendation to buy or sell any financial product.
An IRA (Individual Retirement Account) is a brokerage account with tax advantages designed to help you save for retirement. Choosing the right type of IRA and the right broker can save you tens of thousands of dollars in taxes over a career.
IRA types at a glance
| IRA Type | Tax Treatment | Contribution Limit (2026) | Income Limit (2026) | Best For |
|---|---|---|---|---|
| Traditional IRA | Tax-deferred; contributions may be deductible | $7,000 ($8,000 if 50+) | No limit (deductibility phases out) | High-income earners, pre-tax saving |
| Roth IRA | Tax-free growth and withdrawals | $7,000 ($8,000 if 50+) | $146K single / $230K married (MAGI) | Young earners, tax-free retirement |
| Rollover IRA | Tax-deferred | N/A (rollover only) | No limit | Consolidating old 401(k)s |
| SEP IRA | Tax-deferred | 25% of compensation, max $66,000 | No limit | Self-employed |
| SIMPLE IRA | Tax-deferred | $15,500 (2026) | No limit | Small businesses |
Traditional IRA
Contributions are made with pre-tax dollars (you deduct them from your taxable income). Investments grow tax-deferred. You pay ordinary income tax on withdrawals in retirement.
Contribution limits (2026): $7,000 per year, or $8,000 if you are 50 or older. Income limits for deductibility: If you have a workplace retirement plan, deductibility phases out between $73,000-$83,000 (single) and $116,000-$136,000 (married). Above these limits, contributions are non-deductible but still grow tax-deferred. RMDs: Required minimum distributions start at age 73.
Roth IRA
Contributions are made with after-tax dollars (not deductible). Investments grow tax-free, and qualified withdrawals in retirement are tax-free. Roth IRAs do NOT have required minimum distributions during your lifetime.
Contribution limits (2026): $7,000 ($8,000 if 50+). Income limits: Phaseout starts at $146,000 (single) and $230,000 (married filing jointly). Above the phaseout, you cannot contribute directly to a Roth IRA. Use the backdoor Roth strategy (contribute to a non-deductible Traditional IRA, then convert to Roth).
Which broker is best for an IRA
| Broker | IRA Strength | Why |
|---|---|---|
| Fidelity | Best overall | Zero-expense funds, $0 minimum, strong retirement tools |
| Vanguard | Best for low costs | Client-owned, lowest expense ratios |
| Charles Schwab | Best for research | Excellent retirement planning tools, branches |
| Robinhood | Best match bonus | 1% IRA match on contributions |
| Webull | Best match bonus | 3.5% IRA match |
Common questions
Traditional or Roth: which is better? If you expect to be in a higher tax bracket in retirement, Roth wins. If you expect a lower bracket, Traditional wins. If you are unsure, Roth is safer for younger earners.
Can I have both a Traditional and Roth IRA? Yes. But the combined contribution limit applies ($7,000 total in 2026).
What happens if I withdraw from an IRA early? Withdrawals before age 59 1/2 incur a 10% penalty plus ordinary income tax, with exceptions for first-time home purchases, education, and certain medical expenses. Roth contributions can be withdrawn tax-free and penalty-free at any time.
Can I open an IRA with no income? You need earned income (W-2 or self-employment) to contribute to an IRA. Investment income does not count.
Where to start
Open a Roth IRA at Fidelity if you are under the income limit. Buy a broad-market ETF like VTI with your contribution. Set up an automatic monthly transfer. See the account types hub for comparisons.