As 2025 nears an end, taxpayers, savers, and investors are beginning to receive data for the 2026 Tax Year. We have recently been explaining changes to contribution limits that will take effect on January 1, 2026. Today’s topic is Individual Retirement Accounts, or IRAs. Since their inception in 1974, IRAs have become ubiquitous in American Society, and now represent a substantial national asset, estimated to include at least $18 trillion (12 zeroes).

Popular tenets of IRAs include current tax deductibility for the Traditional IRA and lifetime tax-free growth for Roth IRAs. Many people split their annual contributions between both, leading to more flexible retirement income. Limits are per Individual (the reason for the “I” in IRA.)

For decades, we have complained about low annual contribution limits to IRAs, which are a fraction of limits for contributions to company-sponsored Retirement Plans, such as 401(k)s. Our complaining has never produced results at the national level, but at a minimum, we appreciate any and all raised limits as they happen. We encourage our clients, listeners, readers, and friends to increase their planned contributions for 2026, maxing out if possible.

For Traditional (tax-deductible) 2026 IRA contributions, as well as non-deductible Roth contributions, an increase of $500 is granted, making the maximum $7,500. Contributions may be split between Traditional and Roth, but the annual limit applies in the aggregate. IRA owners who will be age 50 or over on December 31, 2026, have “catch-up” contributions available as well. These are being increased by $100 to $1,100 annually.

Eligibility to contribute to any IRA is limited to the amount of earned income the account owner reports during the tax year. Married couples are allowed to use the income earned by a spouse. There are very strict income limitations for direct contributions to a Roth IRA, but no such limits apply to a Traditional IRA. Instead, there is a limitation as to what proportion of IRA contributions may be deducted on the Individual’s Form 1040 Individual Income Tax Return.

When saving taxes and strengthening retirement savings, take advantage of all the good news you can find. Maxing out contributions is a good start, but one largely ignored benefit comes from making contributions early in the year for which they are designated. Early contributions receive up to an extra year for tax-deferred (or tax-free) growth.

During this time of updating and implementing Retirement Plan changes, review your Beneficiary Designations for accuracy and changes in your family status. Both Primary and Contingent (Secondary) beneficiaries should be specified in writing in your documentation.