The Roth IRA is the most powerful legal tax-free compounding vehicle available to a US person. The Traditional IRA is a durable current-deduction and future-arbitrage instrument. The Self-Directed IRA is an underused wrapper for private-market investing that produced one of the most famous $5-billion tax-free positions in modern finance history. This is the practitioner reference for all of it — the mechanics, the math, the traps, and the specific plays.
| Item | 2026 Value | Detail |
|---|---|---|
| IRA contribution limit | $7,000 | Traditional or Roth or combined |
| Age-50+ catch-up | $1,000 | Additional; total $8,000 |
| Roth phase-out (single) | $150,000–$165,000 | MAGI band; above the end = no direct Roth |
| Roth phase-out (MFJ) | $236,000–$246,000 | MAGI band; above the end = no direct Roth |
| Traditional deductible phase-out (single, w/ workplace plan) | $79,000–$89,000 | Above the end = non-deductible Traditional |
| 401(k) elective limit | $23,500 | Traditional or Roth 401(k) |
| 401(k) age-50 catch-up | $7,500 | Additional |
| 401(k) age-60–63 super catch-up | $11,250 | SECURE 2.0; higher for ages 60–63 |
| §415(c) total DC limit | $70,000 | Employer + employee + after-tax combined |
| RMD age | 73 | SECURE 2.0; rises to 75 after 2032 |
| Inherited IRA rule | 10 yrs | SECURE Act 10-year rule for non-EDBs |
The Traditional IRA gives you a current deduction and future tax on the way out. The Roth IRA gives you a current tax and permanent tax-free compounding after that. On the surface those look symmetric — and if rates were constant and investment returns were modest, they would be close to symmetric. But two things break the symmetry: (a) the Roth’s tax-free compounding runs forever, including through the highest-return periods of a taxpayer’s life; and (b) the Roth carries no Required Minimum Distributions during the original owner’s lifetime, which materially extends the compounding runway and reshapes estate planning.
The Roth becomes disproportionately valuable when the underlying position turns out to be a high-return one. That is why Peter Thiel’s early Roth position in PayPal shares, purchased for $1,700 in 1999, was worth approximately $5 billion by 2021 — the Roth wrapper eliminated tax on every dollar of that gain, and it compounded across two decades untaxed. See the Thiel Strategy page for the full walkthrough.
This reference is research and education. It is not tax or investment advice. The Baratelli Institute is a publisher, not a tax practitioner. Readers should consult qualified counsel before making any IRA decision that turns on individual facts.