1.3 Retirement Limits, RMDs and Rollovers
Key Takeaways
The 2026 combined ordinary IRA contribution limit is $7,500, plus $1,100 at age 50+.
A direct trustee transfer differs from a 60-day IRA rollover.
RMD starting ages depend on birth year; an RMD is not eligible for rollover.
Retirement Plans, Contributions and RMDs
A traditional IRA may receive deductible or nondeductible contributions. Deductibility depends on income, compensation and workplace-plan coverage. Pretax amounts and earnings are generally taxable when distributed; nondeductible basis requires separate tax tracking. A Roth IRA receives after-tax contributions, subject to income eligibility. Qualified Roth distributions meet a five-tax-year requirement and a qualifying event such as age 59½, death, disability or a qualifying first-home distribution. Regular Roth contributions and earnings have different withdrawal-ordering rules.
For 2026, the combined ordinary contribution limit across traditional and Roth IRAs is $7,500, plus $1,100 at age 50 or older, or $8,600 total. Eligible compensation also constrains contributions; qualifying spouses filing jointly may use spousal-IRA rules. A rollover does not consume the annual regular contribution limit.
| 2026 item | Basic limit | Catch-up |
|---|---|---|
| Traditional and Roth IRAs combined | $7,500 | $1,100 at age 50+ |
| 401(k), 403(b), most governmental 457 deferrals | $24,500 | Generally $8,000 at age 50+; $11,250 instead at ages 60–63 where permitted |
| SIMPLE salary reduction | Generally $17,000 | Generally $4,000 at age 50+; $5,250 at ages 60–63; certain eligible SIMPLE plans have different limits |
| SEP employer contribution | Generally lesser of 25% of compensation or $72,000 | Self-employed calculation differs; no ordinary employee deferral catch-up |
These are tax-year limits, not proof of an individual’s eligibility. Record the year, contribution type and age. Distinguish an ordinary contribution, rollover, conversion, recharacterization and excess-contribution correction. A customer who deposits $8,600 at age 45 cannot solve an excess simply by calling it a rollover; obtain the actual source and transaction documentation.
Required minimum distributions (RMDs) generally begin at age 73 for people born in 1951–1959 and age 75 for those born in 1960 or later. The first IRA RMD is generally due by April 1 of the following year; later RMDs are generally due December 31. Deferring the first can therefore produce two RMDs in one year. Employer plans may allow a qualifying still-working delay, but IRAs do not receive that general exception. Owner-lifetime RMDs do not apply to Roth IRAs or designated Roth employer-plan accounts. Beneficiary rules differ. An RMD cannot be rolled over.
Transfers and Rollovers
- Trustee-to-trustee IRA transfer: Direct movement between IRA trustees, outside the 60-day rollover and one-per-year rules.
- Direct plan rollover: An eligible plan distribution goes directly to an eligible plan or IRA. Mandatory 20% withholding generally does not apply.
- Indirect rollover: The participant receives an eligible payment and generally has 60 days to roll it over. An eligible employer-plan distribution paid to the participant generally has mandatory 20% withholding. Ordinary IRA distributions do not automatically follow that rule.
- IRA-to-IRA 60-day rollover: Generally limited to one per 12 months across the individual’s IRAs. Direct trustee transfers, Roth conversions and plan-to-IRA rollovers are not subject to that limit.
A $50,000 eligible plan payment with 20% withheld leaves $40,000. Rolling over only $40,000 leaves $10,000 outside the rollover. Completing a gross $50,000 rollover requires $10,000 from other funds. Explain the operational difference without promising tax-free treatment for an ineligible payment.
A 401(k) is an employer-sponsored defined contribution plan; a SEP IRA primarily receives employer contributions; a SIMPLE IRA combines employee salary reductions with employer contributions. Retirement accounts generally cannot support ordinary margin borrowing. Confirm the custodian, plan type, beneficiary and authorized signer before moving money. The same beneficial owner does not make a taxable-account journal into an IRA tax-neutral.
Sources checked 2026-10-20: IRS 2026 limits, IRS RMD rules, IRS rollovers.
Distribution Processing Example
A customer reaching the applicable RMD age in 2026 asks for a direct rollover of the entire traditional IRA into another IRA and no separate RMD. First determine the required distribution under the applicable account and owner rules. An RMD is not an eligible rollover; moving assets directly does not erase it. Coordinate the eligible transfer and required payment with the custodian’s procedures and record their different tax classifications.
Before releasing an employer-plan payment, ask whether it is an eligible rollover distribution, whether the payee is the participant or receiving trustee, and whether Roth treatment is involved. A correctly typed bank account cannot compensate for an incorrectly coded tax transaction. Preserve the customer instruction and distribution notice. Do not give the same withholding election to every IRA and employer-plan transaction merely because both are retirement assets.
Sources checked 2026-10-20: FINRA Series 99 outline, FINRA customer accounts, FinCEN CDD FAQs.
What is the 2026 ordinary combined IRA limit for an eligible 52-year-old with sufficient compensation?
$7,000
$8,000
$8,600
$15,000
Sections you finish are checked off in the contents.