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Retirement Beginner: Introduction to Individual Retirement Accounts (IRAs)

Introduction to Individual Retirement Accounts How You Can Fund Your IRA How to Contribute to an IRA How and When IRA Contributions Can Be Deducted from Taxable Income Limits on Deducting IRA Contributions if You Are Single or Married and Filing Separately Limits on Deducting IRA Contributions If You Are Married and Filing Jointly How IRAs Are Taxed Taxing of Deductible and Non-Deductible IRA Contributions Taxes on Excess IRA Contributions IRA Rollovers Premature Withdrawals and Insufficient Distributions from IRAs Summary of Individual Retirement Accounts
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How to Contribute to an IRA

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How to Contribute to an IRA

Individuals must have earned income in order to contribute to individual retirement accounts. They must open an IRA account with a custodian such as a bank, credit union, or investment firm. After selecting a custodian, an individual must deposit cash into his or her investment of choice. The largest contribution allowable for 2025 is the smaller of $7,000 or 100 percent of earned income (income from employment).

Things To Know

  • You must open an IRA account with a custodian such as a bank, credit union, or investment firm.
  • A spouse who is not working or has earned only a minimal income may set up a spousal IRA.

What a married couple can contribute

For 2025, a married couple in which both spouses work may contribute up to $14,000 in total, with $7,000 in each account (or 100 percent of earned income, if it is less). If one spouse is not working or has earned only a minimal income, he or she may set up what is called a spousal IRA. The working spouse may contribute on behalf of this other spouse. As long as the working spouse has earned income of at least $14,000, the two may set up two IRAs with a maximum total contribution of $14,000, with a maximum of $7,000 contributed to each account. It is therefore possible that the working spouse may contribute up to 100% of this total.

IRAs have a special catch-up provision that allows a person 50 or older to make an additional $1,000 contribution. This catchup contribution is indexed to inflation.

The deadline for contributing

You may make contributions for a particular year up until April 15 of the following year (unless that date falls on a weekend, in which case it will be extended). You must mark on the contribution form the year for which the contribution is made.