Individual Retirement Accounts (IRAs)
IRAs remain the backbone of personal retirement savings, and Series 66 questions regularly test how contribution limits, tax treatment, and income phase-outs interact. Use the current-year thresholds below; 2026 data reflects Notice 2025-67 (IRS, Nov. 13, 2025).
Contribution Limits (2026)
- Under age 50: $7,500 combined across all Traditional + Roth IRAs
- Age 50 or older: $8,600 (includes the $1,100 catch-up now indexed under SECURE 2.0)
- Contributions cannot exceed the taxpayer’s earned income for the year
- Spousal IRAs are permitted when filing jointly as long as combined earned income covers both contributions
Traditional IRA
Key traits:
- Contributions may be tax-deductible depending on income and employer plan coverage
- Earnings compound tax-deferred; all distributions are taxed as ordinary income
- Anyone with earned income can contribute, but deductibility phases out for higher earners covered by workplace plans
- RMDs begin at age 73 (moves to 75 for those born in 1960 or later per SECURE 2.0)
- 10% penalty applies to pre-59.5 distributions unless an IRA-specific exception applies (death, disability, first-time home purchase up to $10k, qualified education, SEPP/72(t), etc.)
2026 deductibility phase-out ranges (Modified Adjusted Gross Income):
| Filing Status | Covered by Employer Plan? | Full Deduction | Phaseout Range | No Deduction |
|---|---|---|---|---|
| Single / Head of Household | Yes | $81,000 or less | $81,000 - $91,000 | Above $91,000 |
| Married Filing Jointly | Contributor covered | $129,000 or less | $129,000 - $149,000 | Above $149,000 |
| Married Filing Jointly | Contributor not covered, spouse is | $242,000 or less | $242,000 - $252,000 | Above $252,000 |
| Married Filing Jointly | Neither spouse covered | Full deduction at any income | N/A | N/A |
| Married Filing Separately (MFS)* | Contributor covered | Not available | $0 - $10,000 | Above $10,000 |
- If neither spouse is covered by a workplace plan, the contribution stays fully deductible regardless of income.
- Above the phase-out ceiling a taxpayer can still make a non-deductible contribution (Form 8606 tracks basis).
- MFS taxpayers who lived apart from their spouse the entire year use the Single / HOH thresholds instead of the $0 - $10,000 band.
Exam Tip: Gotchas
Deductibility, not contribution eligibility, is what phases out for Traditional IRAs. This distinction is a favorite Series 66 trick question.
Roth IRA
Key traits:
- Contributions are made with after-tax dollars (never deductible)
- Qualified distributions (5-year clock + age 59.5/death/disability/first-time home) are completely tax-free
- No RMDs for the original owner, making Roth IRAs a core estate-planning tool
- Contributions (principal) can be withdrawn anytime tax- and penalty-free under ordering rules
2026 Roth contribution eligibility (MAGI):
| Filing Status | Full Contribution | Phaseout Range | No Contribution |
|---|---|---|---|
| Single / Head of Household | Below $153,000 | $153,000 - $168,000 | $168,000 or more |
| Married Filing Jointly | Below $242,000 | $242,000 - $252,000 | $252,000 or more |
| Married Filing Separately (MFS)* | Not available | $0 - $10,000 | Above $10,000 |
- MFS taxpayers who lived apart from their spouse the entire tax year follow the Single / HOH thresholds.
Exam tip: Roth contributions have income limits; Roth conversions do not. Watch for questions mixing the two.
Traditional vs. Roth IRA Comparison (2026)
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| Contribution limit | $7,500 ($8,600 age 50+) combined across all IRAs | $7,500 ($8,600 age 50+) combined across all IRAs |
| Tax treatment on contribution | Deductible if within limits | Never deductible |
| Tax on growth | Tax-deferred | Tax-free |
| Tax on qualified distribution | Ordinary income | Tax-free |
| Income limits to contribute | None (deductibility phases out) | Yes (see table) |
| RMDs during owner’s lifetime | Yes (age 73/75) | No |
| Early withdrawal penalty | 10% before 59.5 (unless exception) | On earnings only before 59.5 |
Roth Conversion (aka "Backdoor Roth")
- Any taxpayer can convert Traditional IRA dollars to a Roth IRA regardless of income level.
- The converted amount is taxed as ordinary income in the conversion year; no 10% penalty if assets transfer trustee-to-trustee.
- Conversions restart the 5-year clock for penalty-free access to converted principal.
- Strategically helpful for clients expecting higher future tax brackets or seeking to remove future RMDs.
Exam Tip: Gotchas
The pro-rata rule applies. If a client owns pre-tax and after-tax IRA dollars, each conversion or distribution is treated as proportional slices of both.