Who Is Eligible for an IRA?
- Jennifer Wills
- Feb 13
- 2 min read
An individual retirement account (IRA) is a personal savings plan with tax advantages for retirement:
You can set up an IRA yourself or through a licensed financial professional at a bank, brokerage firm, mutual fund company, or other financial services company.
You fill out an application and make an initial contribution.
The company becomes the account custodian.
You must have earned income from a part-time or full-time job to open an IRA. You can contribute to an account even if you contribute to a 401(k), 403(b), Keogh plan, or other work-sponsored retirement plan.
Types of IRAs
You can open a traditional or Roth IRA, or one of each, to enhance your retirement savings and receive tax breaks:
Traditional IRA
Because a traditional IRA is tax-deferred, you won’t owe income tax on the earnings until you withdraw funds. Withdrawals before age 59 ½ can be taxable and incur a 10% penalty. Required minimum distributions (RMDs) must begin at age 70 ½ to avoid penalties.
Roth IRA
Because a Roth IRA grows tax-free, you don’t pay taxes on withdrawals if you are 59 ½ and your account has been open at least 5 years. Early withdrawals of the earnings can be taxable and incur a 10% penalty. Since there are no RMDs, you can keep money in your account until you pass away.
Spousal IRA
You can open a spousal IRA if you work and your spouse doesn’t. The same contribution limits and withdrawal rules that apply to a traditional or Roth IRA also apply to a spousal IRA. You must file a joint tax return in a year that either of you contributes to the account.
IRA Contribution Caps
The maximum you can contribute to an IRA, even if you split your contributions between a traditional and Roth IRA, can change annually. In 2026, the limit is $7,500. If you’re over 50, you can make an additional catch-up contribution of up to $1,100, bringing your total to $8,600.
Investing in Your IRA
There are diverse investment options for your IRA, such as the following:
Real estate investment trusts (REITs)
Exclusions include collectibles, art, gems, and non-US coins.
*This information is for educational purposes only.
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