Quick answer: Putting $7,000 a year into a traditional IRA from 40 to 65 on top of $20,000, at 6%, grows to $469,889; a single filer covered by a workplace plan with a MAGI of $84,000 can deduct $3,500 of it in 2025.
How it's calculated
The 2025 contribution limit is $7,000, or $8,000 from age 50, and not more than your earned income. Anyone with earned income can contribute; the question is whether it is deductible.
If neither you nor your spouse has a workplace plan, the whole contribution is deductible. If you are covered, the deduction phases out between a MAGI of $79,000 and $89,000 (single), $126,000–$146,000 (married jointly); if only your spouse is covered, $236,000–$246,000. Within the range the deductible amount is reduced in proportion, rounded up to $10.
At withdrawal, deducted contributions and all growth are taxed as income; the non-deductible part (your basis) is not. If little of your contribution is deductible, a US Roth IRA is often better.
Worked examples
- Single, covered, MAGI $84,000: 7,000 × (89,000 − 84,000) ÷ 10,000 = $3,500 deductible
- $7,000 a year, 40 to 65, 6%, $20,000 start: $469,889
Frequently asked questions
When must I start withdrawals?
Required minimum distributions start at 73 (75 for people born in 1960 or later). See the US RMD calculator.
Can I withdraw before 59½?
Yes, but the taxable part is usually charged a 10% additional tax as well as income tax, with some exceptions such as a first home (up to $10,000).
What if I live abroad with no US earned income?
Contributions need US-taxable compensation. If all your pay is excluded under the foreign earned income exclusion, you may not be able to contribute.
Does a workplace plan affect my IRA?
It can limit how much of a traditional IRA contribution you may deduct, depending on your income and filing status. You can still contribute.
What is the difference between a traditional and a Roth IRA?
Traditional contributions may be deductible, with tax paid on withdrawal. Roth contributions get no deduction, but qualified withdrawals are tax-free.
Is the balance shown after tax?
With a traditional IRA, the balance is before the tax you pay on withdrawals. Allow for that when planning your retirement income.