Retirement and Social Security
Definition
An individual retirement account where contributions may be tax-deductible and growth is tax-deferred until you withdraw; the 2026 limit is $7,500.
What it means
A traditional individual retirement arrangement, or IRA, is an account you open yourself at a bank, brokerage or other provider. For 2026, you can contribute up to $7,500, or $8,600 if you are 50 or older, but not more than your taxable compensation for the year. A spouse with little or no income can contribute based on the working spouse's pay. Contributions may be deductible; if you or your spouse are covered by a workplace plan, the deduction phases out at certain income levels. Earnings grow tax-deferred, and withdrawals are taxed as ordinary income. Withdrawals before age 59 1/2 may face a 10% additional tax unless an exception applies, and required minimum distributions generally start at age 73. Contributions for a year can be made until the tax filing deadline.
Example
A single worker in the 22% bracket who is not covered by a workplace plan contributes $7,500 for 2026 and deducts it, lowering federal income tax by about $1,650.
Illustrative numbers only. Your situation will differ.