Investing

Roth IRA Guide: Limits, Rules & Withdrawals

Reviewed by Unpack Money Research Desk · Updated October 28, 2026 · Our review process

Quick answer

With a Roth IRA you contribute after-tax money, and qualified withdrawals in retirement are generally tax-free. For 2026 the limit is $7,500 per person ($8,600 at age 50 or older), shared across all your IRAs, with income phase-outs that can reduce or block direct contributions. Whether it suits you depends mainly on your tax rate now versus the rate you expect in retirement — which nobody can know for certain.

Pay tax now, withdraw qualified money tax-free later

With a Roth IRA you contribute after-tax money. Qualified withdrawals in retirement are generally tax-free. That trade — tax today in exchange for tax-free growth and withdrawals later — is the whole decision in miniature. Whether it suits you depends mainly on your tax rate now versus the rate you expect in retirement, which nobody can know for certain.

2026 contribution limits

Opening both a Roth and a traditional IRA does not double the limit. A $4,000 Roth contribution plus a $3,500 traditional contribution uses the full $7,500. Contributions cannot exceed your taxable compensation for the year, subject to the spousal-IRA exception below. The deadline for 2026 contributions is generally April 15, 2027 (the tax-filing deadline, not including extensions).

2026 income phase-outs: who can contribute directly

MAGI is modified adjusted gross income. Inside a phase-out range, your allowed contribution shrinks proportionally; the IRS provides a worksheet for the exact amount. Above the range, you generally cannot contribute directly to a Roth IRA that year.

What counts as eligible income

You need earned income — wages, salary, tips, or self-employment income — at least equal to your contribution. Investment income and Social Security do not count. There is no age limit: as long as you have earned income and meet the income rules, you can contribute. On a joint return, a spouse with little or no earned income may still contribute based on the working spouse's earnings (a spousal IRA), subject to the combined-compensation and per-person limits.

Withdrawals: contributions vs. earnings

Your contributions are generally withdrawable at any time, tax-free and penalty-free, because you already paid tax on that money.

Earnings are tax-free only for qualified distributions — generally, you are age 59½ or older (or meet a qualifying exception) and the account has been open at least five years. Earnings withdrawn early are generally taxable and may also attract a 10% additional tax, subject to exceptions. The IRS applies an ordering rule (contributions first, then conversions, then earnings). Keep records of contributions and conversions; the five-year clock and basis tracking are common sources of confusion.

What a Roth IRA does not do

It does not reduce your taxable income in the contribution year (unlike a deductible traditional IRA contribution). It has no required minimum distributions (RMDs) for the original owner during their lifetime, but inherited-Roth rules differ and are not covered here. And it does not protect investments from market loss — tax treatment and investment risk are separate questions.

Worked example: the monthly arithmetic

$7,500 ÷ 12 = $625 per month. You do not have to max out an IRA for it to be useful; a smaller, regular contribution you can sustain beats a large contribution you abandon. Automating a fixed monthly amount, and increasing it when income rises, is the practical habit behind most of these limits.

Common mistakes

1. Contributing the full limit to two IRAs (the limit is shared).

2. Contributing without earned income, or above the MAGI phase-out.

3. Assuming every withdrawal is tax-free (only qualified withdrawals of earnings are).

4. Leaving an excess contribution in place: excess contributions are generally taxed at 6% per year while they remain in the account — correct promptly if this happens.

Disclosure and disclaimer

Disclosure: Unpack Money currently earns $0 in affiliate revenue and has no approved affiliate programs. No affiliate links appear here. See /how-we-make-money.

Disclaimer: Educational only — not financial, investment, or tax advice. Tax rules change and individual circumstances vary. Check current IRS guidance or speak to a qualified tax professional before contributing or withdrawing. State-tax treatment varies by state and is not stated here.

At a glance

2026 Roth IRA limits and income phase-outs (verified 2026-10-28)

What this means for you

The Roth trade is simple to state and hard to time: pay tax now for tax-free qualified withdrawals later. Check the shared limit, the earned-income rule, and your MAGI phase-out before contributing — and keep contribution records, because the five-year and ordering rules are where mistakes happen.

Keep unpacking