US Retirement Accounts Explained: 401(k), IRA, Roth, and HSA

A US retirement account is a tax wrapper, not an investment. A 401(k) or an IRA holds ordinary stocks, bonds, and funds, but the tax code lets the money inside grow without yearly tax on dividends or gains, in exchange for limits on how much you can put in and when you can take it out.

In short: with a traditional account you deduct or exclude the contribution now and pay income tax when you withdraw. With a Roth account you contribute after-tax money and qualified withdrawals are tax-free. For the 2026 tax year, the 401(k) employee limit is $24,500 and the IRA limit is $7,500, with extra catch-up room from age 50 and a larger 401(k) catch-up at ages 60 to 63.

This guide uses IRS news release IR-2025-111, IRS Notice 2025-67, Publication 590-B, and the IRS catch-up contribution pages. Figures are for the 2026 tax year, as of November 2026. The IRS normally announces the next year’s limits in October or November, so check irs.gov for 2027 figures.

Why these accounts exist

In a regular brokerage account, dividends are taxed every year and gains are taxed when you sell (the details are in how stocks are taxed in the US). Inside a 401(k) or IRA, none of that happens. You can sell, rebalance, and collect dividends without filing a Form 8949. Over decades, not losing a slice of each year’s return to tax is a large advantage, because of the arithmetic covered in how compound growth works.

The main account types

Account	Who opens it	Tax on the way in	Tax on the way out
Traditional 401(k), 403(b), 457(b), TSP	Through your employer	Pre-tax (lowers taxable wages)	Ordinary income
Roth 401(k)	Through your employer, if the plan offers it	After-tax	Tax-free if qualified
Traditional IRA	You, at any broker	Deductible, subject to income limits if you have a workplace plan	Ordinary income (except nondeductible basis)
Roth IRA	You, at any broker	After-tax, subject to income limits	Tax-free if qualified
HSA	You or your employer, with a qualifying health plan	Deductible or pre-tax	Tax-free for qualified medical expenses

401(k) and similar workplace plans

A 401(k) is run by your employer. You choose a percentage of each paycheck, and it goes into the plan before you see it. Many employers add a match, such as 50 cents per dollar on the first 6% of salary. Matching money can be subject to a vesting schedule, meaning you keep it only after a certain number of years of service. Your own contributions are always 100% yours.

You usually pick from a short menu of funds chosen by the plan, often index funds and target-date funds. Fees inside the plan vary widely and are disclosed in the plan’s fee notice.

IRAs

An individual retirement arrangement (IRA) is one you open yourself. You need taxable compensation (wages or self-employment income) at least equal to what you contribute, though a working spouse can fund an IRA for a non-working spouse. For the 2026 tax year you can contribute until the April 2027 filing deadline.

2026 contribution limits

From IR-2025-111 and Notice 2025-67:

Limit, 2026 tax year	Amount
401(k), 403(b), governmental 457(b), TSP employee deferral	$24,500
Catch-up, age 50 and over	$8,000 (total $32,500)
Catch-up, ages 60, 61, 62, 63	$11,250 (total $35,750)
Total of employee plus employer contributions (before catch-up)	$72,000
IRA (traditional and Roth combined)	$7,500
IRA catch-up, age 50 and over	$1,100 (total $8,600)
SIMPLE IRA deferral	$17,000

Two points people often miss:

The $24,500 is per person, not per plan. If you change jobs mid-year, deferrals to both employers’ plans count toward one limit.
The $7,500 IRA limit is shared between traditional and Roth IRAs. You cannot put $7,500 in each.

Catch-up contributions and SECURE 2.0

The SECURE 2.0 Act of 2022 made two changes that apply in 2026.

1. A bigger catch-up at ages 60 to 63. If you turn 60, 61, 62, or 63 during the year, your plan may let you contribute a catch-up of up to $11,250 instead of $8,000. At 64, you drop back to the regular age-50 catch-up. The IRA catch-up does not have this extra tier, but SECURE 2.0 made it adjust for inflation, which is why it rose from $1,000 to $1,100 for 2026.

2. Roth catch-up for higher earners. If your FICA wages (Form W-2 box 3) from the employer sponsoring the plan were more than $150,000 in 2025, any catch-up contributions you make in 2026 must go in as Roth, meaning after-tax. Final Treasury regulations (T.D. 10033, published September 2025) generally apply from 2027, but plans must apply the rule in 2026 using a reasonable, good-faith interpretation. Wages from a different employer do not count. If your plan has no Roth option, you may not be able to make catch-up contributions at all. The $150,000 threshold is indexed for inflation each year.

Roth IRA income limits

You can contribute to a Roth IRA only if your modified adjusted gross income (MAGI) is below a phase-out range. For the 2026 tax year:

Filing status	Full contribution if MAGI is below	No contribution if MAGI is at or above
Single, head of household	$153,000	$168,000
Married filing jointly	$242,000	$252,000
Married filing separately	(phase-out starts at $0)	$10,000

Roth 401(k)s have no income limit, which is one reason higher earners use them.

Traditional IRA deduction limits

Anyone with earned income can contribute to a traditional IRA. Whether the contribution is deductible depends on income only if you (or your spouse) are covered by a workplace plan. For the 2026 tax year, the deduction phases out over these MAGI ranges:

Situation	Phase-out range
Single, covered by a workplace plan	$81,000 to $91,000
Married filing jointly, contributing spouse covered	$129,000 to $149,000
Not covered, but spouse is covered	$242,000 to $252,000
Married filing separately, covered	$0 to $10,000

If you or your spouse are not covered by any workplace plan, the deduction has no income limit. A nondeductible contribution is still allowed, and it creates basis you must track on Form 8606 so you are not taxed on it again later.

Getting money out

The 10% additional tax

Withdrawals from traditional accounts before age 59½ generally owe ordinary income tax plus a 10% additional tax. The IRS lists more than 20 exceptions, including disability, terminal illness, certain medical expenses, a first-time home purchase (up to $10,000, IRAs only), qualified higher education expenses (IRAs only), substantially equal periodic payments, and qualified birth or adoption distributions. Employees who leave their job in or after the year they turn 55 can generally take money from that employer’s 401(k) without the 10% tax.

Roth rules

Your own Roth IRA contributions can come out at any time, tax-free and penalty-free. Earnings are tax-free only in a qualified distribution: at least five years after January 1 of the first year you contributed to any Roth IRA, and after age 59½ (or death, disability, or a first-time home purchase). Converted amounts have their own five-year clock for the 10% tax.

Required minimum distributions

Traditional IRAs and 401(k)s require required minimum distributions (RMDs) starting at age 73 under current law, and SECURE 2.0 moves that to 75 for people born in 1960 or later. Roth IRAs have no RMDs during the owner’s lifetime, and since 2024, Roth 401(k)s do not either. Missing an RMD triggers a 25% excise tax on the shortfall, reduced to 10% if corrected promptly.

Health savings accounts

An HSA is not a retirement account by name, but it is often used as one. You need a high-deductible health plan. Contributions are deductible, growth is untaxed, and withdrawals for qualified medical expenses are tax-free at any age. After 65, non-medical withdrawals are taxed as ordinary income but avoid the 20% penalty that applies before 65.

For the 2026 tax year, under Revenue Procedure 2025-19, the limits are $4,400 for self-only coverage and $8,750 for family coverage, plus $1,000 if you are 55 or older. The One Big Beautiful Bill Act (July 2025) expanded eligibility from 2026: IRS Notice 2026-5 explains that bronze and catastrophic marketplace plans can now be treated as HSA-qualifying, and certain direct primary care arrangements no longer disqualify you.

What the 2025 law changed (and did not)

The One Big Beautiful Bill Act did not change 401(k) or IRA contribution limits, catch-up rules, or the Roth income limits. Those 2026 figures come from normal inflation indexing and SECURE 2.0. The law did create Trump Accounts, a new kind of IRA for children under section 530A. Contributions began July 4, 2026, are capped at $5,000 a year for 2026 and 2027 from family, friends, and employers combined, and the Treasury makes a one-time $1,000 pilot deposit for eligible US citizen children born from 2025 through 2028.

Separately, SECURE 2.0 replaces the Saver’s Credit with a Saver’s Match starting in 2027, a federal deposit of up to 50% of eligible contributions for lower-income savers. For 2026, the Saver’s Credit income limits are $40,250 (single), $60,375 (head of household), and $80,500 (married filing jointly).

Worked example 1: the age 60-63 catch-up with the Roth rule

Dana turns 61 in 2026. Her 2025 FICA wages from her employer were $180,000.

Regular deferral limit: $24,500, which she can split between traditional and Roth as she likes.
Age 60-63 catch-up: $11,250.
Total she can defer: $24,500 + $11,250 = $35,750.
Because her 2025 wages from this employer exceeded $150,000, the full $11,250 catch-up must be Roth.

If her marginal federal rate is 24%, the Roth catch-up costs her about $11,250 × 24% = $2,700 more in 2026 tax than a traditional catch-up would have, in exchange for tax-free qualified withdrawals later. Her employer’s match counts toward the $72,000 total limit, not toward her $24,500.

Worked example 2: a partial Roth IRA contribution

Sam is single, age 35, with 2026 MAGI of $160,000, inside the $153,000 to $168,000 phase-out.

Position in the range: ($160,000 - $153,000) ÷ $15,000 = 7/15
Reduced limit: $7,500 × (1 - 7/15) = $7,500 × 8/15 = $4,000

Publication 590-A says to round up to the next $10, and to allow at least $200 if the result is above zero. Here the answer is exactly $4,000. If Sam were 50, the same fraction would apply to $8,600: $8,600 × 8/15 = $4,586.67, rounded up to $4,590.

Worked example 3: traditional or Roth?

Take $10,000 of pre-tax salary, a 22% tax rate today, and a hypothetical 7% annual return for 30 years (growth factor 1.07^30 = 7.6123).

Roth: pay 22% now, invest $7,800. After 30 years: $7,800 × 7.6123 = $59,376, tax-free.
Traditional: invest the full $10,000. After 30 years: $76,123, taxed at withdrawal. At 22%, you keep $59,376. At 12%, you keep $66,988.

If your tax rate is the same now and in retirement, the two come out identical. The choice turns on whether you expect your rate to be higher or lower later, which no one knows for certain. Many people hold both to keep options open.

Worked example 4: the cost of an early withdrawal

At age 45, Chris withdraws $20,000 from a traditional 401(k). He is in the 22% bracket and no exception applies.

Income tax: $20,000 × 22% = $4,400
10% additional tax: $2,000
He keeps $13,600, before any state tax, and loses all future tax-deferred growth on the $20,000.

What can go wrong

Leaving the match on the table. Contributing less than the amount your employer matches forgoes part of your pay.
Excess contributions. Putting more than the limit into an IRA, or contributing to a Roth IRA when your income is too high, triggers a 6% excise tax each year until fixed.
Missing the Roth catch-up change. High earners at plans without a Roth option may find catch-ups unavailable in 2026.
Investing the money nowhere. Money deposited in an IRA can sit in cash until you choose investments. Check that it is actually invested.
Cashing out on a job change. A distribution instead of a rollover to an IRA or a new plan triggers tax and often the 10% additional tax.
Forgetting Form 8606. Untracked nondeductible IRA contributions can end up taxed twice.

The short version

Retirement accounts are tax wrappers. For the 2026 tax year you can defer $24,500 into a 401(k) plus $8,000 from age 50, or $11,250 at ages 60 to 63, and put $7,500 into IRAs plus $1,100 from age 50. Roth IRA contributions phase out between $153,000 and $168,000 of MAGI for single filers. If your 2025 wages from your employer topped $150,000, your 2026 catch-ups must be Roth. Withdrawals before 59½ usually cost an extra 10%. HSAs add a third tax-advantaged option for people with qualifying health plans. Canada’s equivalents work differently and are explained in Canadian registered accounts explained.

This is general education, not tax or legal advice. Retirement account rules depend on your circumstances and your plan’s terms, and limits change every year. For decisions about your own accounts, consult a qualified tax professional, your plan administrator, or the IRS directly.