IRAs: The Flexible Retirement Account You Control
An Individual Retirement Account (IRA) isn't tied to an employer. You open it yourself, choose your own investments from a broad menu, and keep it regardless of where you work. For FIRE investors, the Roth IRA in particular has a set of features that make it nearly irreplaceable.
Two Flavors: Traditional and Roth
Traditional IRA: You may deduct contributions from taxable income (subject to income limits if you also have a workplace plan). The money grows tax-deferred. You pay ordinary income tax on withdrawals.
Roth IRA: Contributions are made with after-tax dollars. The money grows tax-free. Qualified withdrawals in retirement are completely tax-free.
The core trade-off is the same as with 401(k)s: pay taxes now (Roth) or later (Traditional). See Roth vs. Traditional for a detailed comparison.
Contribution Limits
For 2026:
- $7,500 per year if you're under 50
- $8,600 per year if you're 50 or older
These limits are much lower than 401(k) limits ($24,500). You can contribute to both an IRA and a 401(k) in the same year — they have separate limits.
Income Limits
Roth IRA: Direct contributions phase out at higher incomes. For 2026, the phase-out begins at $153,000 (single) or $242,000 (married filing jointly). Above these limits, the contribution amount is reduced; above the top of the phase-out range, direct contributions aren't allowed.
Traditional IRA deductibility: If you (or your spouse) participate in a workplace retirement plan, your ability to deduct traditional IRA contributions phases out at certain income levels. You can still contribute to a traditional IRA at any income — you just may not get a deduction.
The Backdoor Roth
High earners who exceed the Roth IRA income limits have a workaround: the backdoor Roth conversion.
- Contribute to a traditional IRA (non-deductible, after-tax)
- Convert it to a Roth IRA shortly after
The converted amount is taxable only to the extent it represents pre-tax money. If you have no other traditional IRA funds (the "pro-rata rule" is the catch here), the conversion is essentially tax-free.
This is legal, widely used, and explicitly acknowledged by the IRS. Consult a tax professional if you have existing traditional IRA balances, which complicate the math.
Why the Roth IRA Is the FIRE Community's Favorite
The Roth IRA has a feature that no other retirement account offers:
Contributions (not earnings) can be withdrawn at any time, at any age, without taxes or penalties.
You contributed $7,000/year for 10 years? That $70,000 is accessible penalty-free even at age 35. The earnings on those contributions must wait until 59½ (or qualify under the 5-year rule), but the contributions themselves are yours.
This makes the Roth IRA a key piece of the early retirement bridge — a source of accessible funds between leaving work and 59½.
The Spousal IRA
If one spouse has little or no earned income, they can still contribute to an IRA as long as the other spouse has sufficient earned income. A two-income household can each contribute $7,000; a single-income household can contribute $7,000 for each spouse, for $14,000 total.
IRA vs. 401(k): Why Not Both?
You can and should use both. IRAs offer investment flexibility (you choose the brokerage and the funds, with access to the lowest-cost options available) and features like the Roth penalty-free withdrawal rule that 401(k)s don't match. Max your 401(k) employer match first, then fill your IRA, then return to the 401(k).