Retirement Retirement Planning

6 Lies You've Been Told About IRAs (And Probably Believed)

We debunk retirement account misconceptions.

By Linsey Knerl , Edited by Kristy DeSmit

Updated April 23, 2026

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According to ICI Research, approximately 44% of U.S. households hold Individual Retirement Accounts (IRAs), which are tax-advantaged accounts separate from employer-offered 401(k)s. However, many misunderstand the rules and how to best use them to meet their retirement goals.

With three types to choose from, including Roth, traditional, and options for the self-employed, it can be difficult to keep track of what's what. Add in changing tax laws and old advice from the internet, and you can see how confusion may set in.

Fortunately, confusion is easy to clear up when you have access to the right information. We're breaking down the most common myths to set the record straight on IRAs.

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You can't contribute to an IRA if you have a 401(k)

This is a common point of confusion, especially among workers who take full advantage of an employer-offered plan with matching. You technically can contribute to both types of plans, but your IRA contribution deductibility may phase out after a point. This all depends on your income tier and how you participate in the employer plan, so it varies by individual.

If you've contributed so much that you're at risk of losing additional deductions, you can still contribute. Checking with a tax professional can help you know what to do next.

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You can't have more than one IRA

This myth is a variation on the previous one. And yes, you can contribute to more than one IRA at once. People own multiple IRAs with different providers, and for different purposes.

For example, someone could choose one for long-term investing and another for safer, fixed-income assets. No matter how you mix-and-match, the annual contribution limits apply across all accounts: $7,500 if under 50 and $8,600 if over.

Be sure to track contributions with each account, so you know where you stand.

You can only open an IRA at your bank

Many banks offer IRAs, but they aren't the only place to get into one. Some popular alternatives include:

Brokerage IRA, where you can choose from stocks, bonds, ETFs, and target-date funds
Robo-advisor IRA, offering automated investments based on your age and risk tolerance
Self-directed IRA, where you can hold assets like real estate or small business investments, along with traditional stocks

You can always start at a bank, but later roll an IRA into another option, especially if you want access to more funds and a different fee schedule. Depending on your preferences, such as how hands-on you want to be, you can typically find an IRA product to match.

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All IRAs are the same

There are several IRA options out there with little in common except "IRA" in the name. Each of these has different approaches to helping you retire:

Traditional IRA: Contributions may be tax-deductible, but withdrawals are taxed in retirement
Roth IRA: Contributions are made after taxes, but qualified withdrawals are tax-free
SEP or SIMPLE IRA: Higher contribution limits make these appealing, and they are often used by freelancers who don't have access to other options

Your income level, expected tax bracket in retirement, and current tax strategies will all influence which IRA you choose. You may find your priorities shift over time, and moving to a different IRA strategy is always an option.

Roth IRAs are always better

You've likely heard more about the Roth IRA than other types, but it's not ideal for everyone. That's because Roth contributions don't lower your taxable income today. Instead, they offer tax-free withdrawals in retirement; some high earners may benefit more from a tax deduction today via a traditional IRA.

Roth IRAs also have income limits. For 2026, single filers can make a full contribution only if their income is below $153,000, with eligibility phasing out completely at $168,000. If you earn above those limits or want to lower your taxable income today, a traditional IRA may be the better path.

You can't contribute to an IRA after you turn 70 1/2

Before the 2019 SECURE Act, you were not able to put money in after age 70 1/2. But as of 2020, that's no longer true.

As long as you have earned income from a job or business, you can keep contributing, and there's no age limit. This change can help older savers extend their tax-deferred or tax-free growth, an especially useful tactic for those behind on their retirement goals.

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Bottom line

IRAs are powerful, but there's a lot of nuance. If you're not paid to follow the news and learn the ins and outs — like a tax professional — it's understandable to miss some rules.

Still, keeping up with the facts can help you make the right moves by avoiding missed deductions, penalties, and costly investment choices. If you haven't reviewed your IRA contribution eligibility lately, now's the perfect time. The more clearly you separate fact from fiction, the better chance your IRA has to deliver the retirement security it was built for.

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