Episode Transcript
Roth and traditional IRAs, you can save even more this year. Plus, for the first time ever, there's a boost to catch-up contributions. This is Money Unscripted, Fidelity's personal finance podcast with Rita Assaf, Fidelity Vice President of Retirement Offerings, and me, Ally Donnelly. Today, the update to IRA accounts you need to know. Rita, let's get right to those increased contribution limits. How much did it go up in 2026?
Well, it's gone up by $500 for a total of $7,500 that you can contribute to a Roth or traditional IRA in 2026. And this is important, because this is the first increase that we've had in two years. So you can actually put more into your IRA.
There's also something exciting for us folks over 50. Talk to me about the new catch-up contributions.
Well, catch-up contributions have actually gone up for the first time ever by $100 to a total of $1,100. So someone 50 and older can actually contribute a total of $8,600 in 2026, and that's because of SECURE 2.0 legislation, which looked at whether contribution limit or catch-up contribution limit should be indexed for inflation.
OK, walk me through that.
Well, IRS actually looks at consumer price index and inflation rate to determine what the contribution rate should be, so that it's not eroded over time by purchasing power of your dollar.
Mmm, so ostensibly, this could continue as that law gets solidified.
Yes.
OK, it's your income that determines whether or not you're eligible to contribute to a Roth in the first place. So talk to me about the income limits this year. We're seeing a boost there as well.
That's right. It's actually gone up for a single person, up by $3,000 to $153,000. And what that means is that, if you make below $153,000, you can actually contribute $7,500. That's your modified gross income. If you're single, but making between $153,000 and $168,000, you can make a partial contribution. But if you make more than $168,000, then you're not eligible to contribute to a Roth IRA.
What about married couples?
That has actually gone up also by $6,000. So for married couples filing jointly, they can make the full $7,500 contribution, if they are earning less than $242,000. And couples are eligible for a partial contribution to a Roth if they earn between $242,000 and $252,000. So if a couple makes over $252,000, they cannot contribute to a Roth IRA.
So as I'm hearing about these increases, and I'm trying to see if it's right for me, if I'm eligible, why might I want to consider a Roth IRA?
Well, first, it's flexibility. With a Roth IRA, since you're making after-tax contributions, you can actually withdraw those contributions at any point, penalty and tax-free. Second, your earnings have the potential to grow tax-free. And then your withdrawals, as long as they're qualified and meet certain conditions, can also be withdrawn tax-free in retirement. And, finally, there are no required minimum distributions in a Roth IRA, which allows your money to grow tax-free during your lifetime.
What if I make too much money? What if I'm not eligible?
Well, the one benefit that you might want to look into is either Roth conversion or what we call a backdoor Roth conversion. But there are things you want to weigh there, because if you do make a mistake, it can be pretty costly.
Yeah, we have another Money Unscripted episode specifically about those conversions and a backdoor Roth. So we'll put a link in our show notes or on our website, but you know, we've mentioned the limits and catch up limits for both Roth and traditional IRA accounts. I can have both, right?
Yes, you can. If you're eligible to contribute to a Roth, and you want to contribute to traditional IRA, you can actually have both. However, the limit, the contribution limit, applies to both accounts, not each.
Meaning it's a combined?
Correct.
Got it.
And the benefit of this is that you actually get what we call tax diversification in retirement, where you have a bucket of withdrawals that come from this tax-deferred traditional IRA and tax-free Roth IRA, and it helps you to manage your taxes in retirement.
But again, if I'm weighing, oh, should I put more of my contribution in Roth or additional, if I'm weighing those two, one versus the other, how should I think about it?
There are three things to consider. Consider tax benefits, income limits, and withdrawals.
All right, let's take it one by one, taxes.
Well, for taxes, what you want to consider is whether your income will be higher or lower in retirement. If you think it'll be higher, then you might want to consider a Roth IRA, where you're not getting any sort of tax benefit right now, but you have the benefit of potential tax-free withdrawals in retirement. For traditional IRA, if you think your withdrawals would be lower in retirement, then it might be more beneficial to contribute to a traditional IRA, and if you're eligible, take that tax deduction right now to reduce your taxable income.
OK, let's hit on income.
Well, so your first requirement to even be able to contribute to an IRA is to have earned income. But then second, your income determines whether you can contribute to a Roth IRA or if you can deduct your contributions into a traditional IRA.
Third, withdrawals, what do we need to know here?
So when it comes to withdrawals, traditional IRAs do have required minimum distributions, which means at age 73, if you haven't withdrawn yet, you do actually have to take money out, and that is taxable to you. But for Roth IRAs, there is some flexibility. You can actually take out your contributions at any point, at any time, penalty and tax-free because it's already been taxed, and they do not have required minimum distributions.
OK, all right, can we pull back big picture for a second? So, as I'm trying to figure out the role of any retirement account, any individual retirement account in my portfolio or in my financial plan, map out how investing in an IRA can add up over the years. So let's take that $7,500 contribution limit for 2026.
Well, taking a hypothetical example of just making a contribution one time of $7,500 in 2026, in 10 years, that could grow to $14,754. In 20 years, that could be over $29,000, and in 30 years, that could be over $57,000. And this hypothetical example is only factoring in one contribution at one time. It doesn't consider any new contributions that you might make, as well as recurring investing that you might do.
OK, so let's talk about a timeline. If I didn't contribute to my IRA by the end of that calendar year, am I out of it?
You're not. This is actually a really cool feature. You can almost go back in time. So if you hadn't made a contribution for 2025, and you're in 2026, you can still make that contribution for 2025 up to the tax deadline, which is generally April 15 of every year.
Oh, that's great. Talk to me about final takeaways. It's just been kind of a chock a block of information. So what do you really hope our audience walks away with?
Well, I know this can be a lot. But first, I would say, especially for when it comes to retirement, have a plan. Plan builds confidence. Fidelity suggests saving 15% of your pre-tax income for retirement, and that could include multiple different types of retirement accounts.
Second, and I see this as a common mistake when it comes to IRAs, invest your IRA. So first step, deposit the money, that is fantastic. But you do actually have to take the next step, which is to invest, or else you do lose out on compound earning growth.
Yeah, and we've heard from advisors who say they've had clients who did not take that step, and it sat their entire retirement.
I know. It's awful. So consider recurring investments, which allow you to automate your investments. So that way, anytime a deposit does go into your account, it's automatically invested, and your future self will thank you.
Terrific. Rita, thank you so much for coming in.
Thank you for having me.
If you want some help figuring out which IRA might be right for you and how much you could contribute, check out Fidelity.com/IRAcalculator. Be sure to like, follow, share the podcast, and we'll see you next time on Money Unscripted. It's your life. Get your money's worth.
[MUSIC PLAYING]
[DISCLOSURES]
For a Roth IRA distribution to be considered qualified, the 5-year aging requirement has to be satisfied, and you must be age 59½ or older or meet one of several exemptions (disability, qualified first-time home purchase, or death among them).
A distribution from a Traditional IRA is penalty-free provided certain conditions or circumstances are applicable: age 59 1/2; qualified first-time homebuyer (up to $10,000); birth or adoption expense (up to $5,000 per child); emergency expense (up to $1000 per calendar year); qualified higher education expenses; death, terminal illness or disability; health insurance premiums (if you are unemployed); some unreimbursed medical expenses; domestic abuse (up to $10,000); substantially equal period payments; Qualified Federally Declared Disaster Distributions or tax levy.
Hypothetical example assumes the following: (1) one annual $7,500 IRA contribution made on January 1 of the first year (2) annual rate of return of 7% , and (3) no taxes on any earnings within the IRA. The ending values do not reflect taxes, fees or inflation. If they did, amounts would be lower. Earnings and pre-tax (deductible) contributions from a Traditional IRA are subject to taxes when withdrawn. Earnings distributed from Roth IRAs are income tax free provided certain requirements are met. IRA distributions before age 59 1/2 may also be subject to a 10% penalty. Systematic investing does not ensure a profit and does not protect against loss in a declining market. Consider your current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this. The assumed rate of return used in this example is not guaranteed. Investments that have potential for a 7% annual rate of return also come with risk of loss. This hypothetical does not reflect the impact that minimum required distributions from a Traditional IRA could have if you turn 73 during the time period.
Investing involves risk, including risk of loss.
Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. The views and opinions expressed by the Fidelity speaker are his or her own as of the date of the recording and do not necessarily represent the views of Fidelity Investments or its affiliates. Any such views are subject to change at any time based on market or other conditions, and Fidelity disclaims any responsibility to update such views. These views should not be relied on as investment advice and, because investment decisions are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any Fidelity product. Neither Fidelity nor the Fidelity speaker can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Please consult your tax or financial advisor for additional information concerning your specific situation.
Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
This podcast is intended for U.S. persons only and is not a solicitation for any Fidelity product or service.
This podcast is provided for your personal noncommercial use and is the copyrighted work of FMR LLC. You may not reproduce this podcast, in whole or in part, in any form without the permission of FMR LLC.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
© 2026 FMR LLC. All rights reserved.
1237890.1.2
