You now know what MAGI is, and you know how the benefits cliff works. This article covers the actual tool that connects the two: a Traditional retirement account.
"Traditional" here is a specific tax term — it doesn't mean old-fashioned or basic. It refers to a category of retirement accounts where your contributions are made pre-tax, which is exactly the feature that reduces your MAGI.
What "pre-tax" actually means
When you contribute to a Traditional IRA or a Traditional 401(k), that money is subtracted from your income before it's counted for tax purposes — and before it's counted toward your MAGI. You don't pay income tax on it now. Instead, you pay tax later, when you withdraw the money in retirement.
"Pre-tax doesn't mean tax-free forever. It means the IRS lets you delay the tax — and in the meantime, that same delay is what lowers your MAGI today."
This delay is the entire mechanism behind the cliff-bridging strategy. The government wants people to save for retirement, so it built in an incentive: contribute now, and your current-year taxable income — and your MAGI — goes down.
The two most common Traditional accounts
| Account | 2026 limit | Who can open it | Reduces MAGI? |
|---|---|---|---|
| Traditional IRA | $7,500 | Anyone with earned income | ✓ Yes |
| Traditional 401(k) | $24,500 | Through an employer that offers one | ✓ Yes |
A Traditional IRA is available to almost anyone with earned income and can be opened independently at any major brokerage — no employer involvement required. A Traditional 401(k) is only available if your employer offers one, but it allows a much larger contribution, and often comes with an employer match (more on that below).
How to actually open and use one
Check whether you have access to an employer 401(k) first
If your employer offers a 401(k) — especially with a match — that's usually worth prioritizing, since an employer match is free money on top of the MAGI benefit. If not, a Traditional IRA is fully available to you independently.
Open a Traditional IRA at a brokerage if you don't have a 401(k), or in addition to one
Most major brokerages let you open a Traditional IRA online in about 10 minutes, with no minimum balance required at several of them. See our recommended brokerages for a comparison.
Set up a contribution amount based on your specific threshold
Use the benefits cliff calculator to see exactly how much you need to contribute to keep your MAGI under your specific threshold — it's often much less than the full annual limit.
Automate it
Set up a recurring monthly contribution rather than relying on remembering to do it manually. This also means you're naturally dollar-cost averaging into the market — buying in consistently rather than trying to time it.
Traditional vs. Roth: why this distinction matters so much
This is the single most common point of confusion on this entire site, so it's worth being explicit: only Traditional contributions reduce your MAGI. A Roth IRA or Roth 401(k) is also a great retirement account — but contributions are made with money you've already paid tax on, which means they do not lower your MAGI at all.
If your goal is protecting benefits, it must be Traditional — not Roth
If you're trying to stay under a benefits threshold, contributing to a Roth account instead of a Traditional one accomplishes nothing for that goal — even though it's still a good account in other respects. We cover this distinction in much more depth in Roth vs. Traditional: The Choice That Decides Whether You Keep Your Benefits.
What it costs you (and what it doesn't)
The honest tradeoff: money contributed to a Traditional retirement account isn't available to spend right now — it's meant to stay invested until retirement, with penalties for early withdrawal in most cases. That's a real constraint, and it's part of why this strategy works best for income that's genuinely extra — a raise, a new job, additional hours — rather than money you need for today's groceries or rent.
Three things happening with the same dollar
A single dollar contributed to a Traditional IRA does three jobs simultaneously: it lowers your taxable income today (smaller tax bill), it lowers your MAGI today (protecting your benefits), and it grows tax-deferred in the market for your future. No other financial move on this site does all three at once.
Now that you understand the foundational pieces — MAGI, the cliff, and the Traditional account that bridges it — the rest of the articles on this site go deeper into specific situations: self-employment, FSAs and HSAs, gig work, and more.
Find your number
Use the calculator to see exactly how much to contribute to a Traditional account to protect your specific benefits.
Try the calculator →Ready to open an account? See our recommended brokerages →