Tax Breaks for Retirement Savers

2026 contribution limits

Starting in 2026, if your wages from the employer were above the SECURE 2.0 threshold (about $150,000) the prior year, your workplace catch-up contributions must go into the Roth side of the plan.

Traditional or Roth?

• Traditional contributions are deducted (or excluded from wages) now. Growth is tax-deferred, and withdrawals are taxed as ordinary income. Required minimum distributions begin at 73 (75 for people born in 1960 or later).
• Roth contributions get no deduction, but qualified withdrawals, including all the growth, are tax-free. Roth IRAs have no required distributions during the owner’s life.

In general, traditional makes more sense if you expect a lower tax rate in retirement, and Roth if you expect the same or higher. Many people split contributions between the two. See our Roth IRA guide for Roth income limits and conversions.

Deducting a traditional IRA

Anyone with earned income can contribute to a traditional IRA. The deduction is limited only if you (or your spouse) are covered by a workplace retirement plan. For 2026 the deduction phases out at these incomes:

• Single, covered by a workplace plan: $81,000–$91,000
• Married filing jointly, contributing spouse covered: $129,000–$149,000
• Married filing jointly, contributing spouse not covered but the other spouse is: $242,000–$252,000

A non-working spouse can contribute to a spousal IRA based on the working spouse’s income.

The Saver’s Credit

If your income is modest, you can get a credit of 10%, 20%, or 50% of up to $2,000 of retirement contributions ($4,000 joint). For 2026 the credit is available with adjusted gross income up to:

• $80,500, married filing jointly
• $60,375, head of household
• $40,250, single

Full-time students and people claimed as dependents aren’t eligible. Beginning in 2027, the credit is scheduled to be replaced by a government “Saver’s Match” deposited into the saver’s retirement account.

Self-employed

Self-employed people can use a SEP-IRA (roughly 20% of net self-employment earnings, subject to an annual dollar cap) or a solo 401(k), which allows both employee deferrals and employer contributions and often permits more savings at lower incomes.

Deadlines

IRA and HSA contributions for a year can be made until the tax filing deadline, generally April 15 of the next year (extensions don’t extend it). 401(k) deferrals must come out of paychecks by December 31. SEP contributions can be made up to the extended due date of the return.

Early withdrawals

Withdrawals before 59½ generally face a 10% additional tax on top of income tax, with exceptions for things like disability, first-time home purchases (IRAs, up to $10,000), higher education (IRAs), certain emergencies, and leaving an employer at 55 or older (workplace plans).

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