Must-Ask Questions: IRA Contributions

An employer-sponsored retirement plan isn't your only way to save for the future. Indeed, if your employer offers a plan—and a match—you'll want to aim to contribute at least enough to earn the full amount. But the next best place to save—especially if you don't have a retirement plan at work—may be an individual retirement account (IRA).

"The ability to defer taxes and invest for potential growth are some of the reasons to consider an IRA. And if you opt for a Roth IRA, another benefit is the ability to make tax-free withdrawals in retirement," says Rob Williams, head of financial planning and wealth management research at the Schwab Center for Financial Research. "But before you open one, it's important to understand the rules and how each type of IRA differs."

Here are eight must-ask questions about IRA contributions—who's eligible, how much, pre-tax versus after-tax, and more. However, we recommend you consult with a tax advisor about your personal circumstances.

Anyone with earned income (e.g., salary, wages, or tips from a job or self-employment) can contribute to a traditional IRA. Additionally, to contribute to a Roth IRA, your income must fall below a certain limit, but there are no age restrictions.

For 2026, the annual maximum IRA contribution is $7,500 if you're under 50, or $8,600 if you're 50 or older due to the additional $1,100 catch-up contribution. The maximum contribution for 2025 is $7,000 for those under 50, or $8,000 for those 50 or older.

Keep in mind, your annual IRA contributions can't exceed your income for the year. And for the Roth IRA, if your income goes over the IRS threshold, your contributions will be phased out. And you can contribute to multiple IRAs in the same year (for example, a traditional IRA and a Roth IRA), but your combined contributions can't exceed the annual maximum. Speak with your tax advisor to determine the best approach in your situation.

Note: As a reminder, you still have until Tax Day (April 15, 2026) to make your 2025 IRA contribution, if you haven't done so already. But if you do so, make sure to instruct your IRA custodian to apply the contribution to the current tax year by, for example, writing the contribution year on the check, otherwise they may think it's for 2026.

Pre-tax IRA contributions are generally tax-deductible and allow you to delay taxes until you withdraw money from your account. After-tax contributions are made with income you've already paid taxes on and there's no up-front tax break. You can also contribute pre-tax or after-tax dollars to a traditional IRA,¹ but Roth IRA contributions can only be made with after-tax dollars.

Contributions to traditional IRAs are generally tax-deductible if you're not covered by an employer retirement plan. But if you or your spouse have a 401(k) or other employer retirement plan in addition to a traditional IRA, you'll also need to meet certain income limits, otherwise the deduction can be phased out. Contributions to Roth IRAs aren't tax-deductible because they're always made with after-tax dollars.

If you inherit an IRA from your spouse, you can treat it as your own and make contributions to the account. But if you inherit it from someone other than your spouse, you can't make additional contributions. Certain rules also apply when it comes to taking money out, including when you're required to start withdrawing funds and how long you have before you need to empty the account. The rules can be complicated, so consider working with a tax advisor to avoid costly mistakes.

In most cases, you must have earned income to contribute to an IRA. So, if you're completely retired and not earning wages or a salary, you won't be eligible. (Passive income from interest, dividends, a pension, or capital gains are not included in "earned income" and don't affect your eligibility.) One exception, however, is a spousal IRA, which allows a non-working spouse to contribute to an IRA as long as the other spouse is still working and the couple files a joint return. You may be able to claim a deduction for spousal IRA contributions, but keep in mind that the deduction may phase out if your joint income goes over the IRS threshold.

Contributing more than the annual IRA contribution limits allow can trigger a 6% penalty. In most cases, you can remove the extra funds, but you may still owe a penalty. If you overcontribute to a traditional IRA, you may also owe additional taxes on your withdrawals. For the best outcome, consider talking to a tax advisor about your specific situation.

Most IRAs offer a wide selection of investment choices, such as individual stocks, bonds, mutual funds, ETFs, and certificates of deposit (CDs). If you're not comfortable building your own diversified portfolio based on your goals and risk tolerance, consider using a portfolio tool to help you with choices or work with an advisor to discuss your options.