What Is a Traditional IRA?
In plain English
A traditional IRA is an individual retirement account where contributions may be tax-deductible depending on your income and workplace retirement plan access. Investments grow tax-deferred, and withdrawals in retirement are taxed as ordinary income. Required minimum distributions must begin at age 73.
Are Traditional IRA Contributions Tax-Deductible?
Whether your contributions are deductible depends on your income and whether you or your spouse are covered by a workplace retirement plan. If neither of you has a workplace plan, contributions are fully deductible regardless of income. If you do have a workplace plan, deductibility phases out at certain MAGI thresholds set annually by the IRS.
What Are the Traditional IRA Withdrawal Rules?
You can begin taking penalty-free withdrawals at age 59½. Withdrawals are taxed as ordinary income. If you withdraw before 59½, you'll typically pay a 10% penalty plus income taxes, with some exceptions. Starting at age 73, the IRS requires you to take required minimum distributions (RMDs) each year whether you need the money or not.
How Does a Traditional IRA Compare to a Roth IRA?
The core difference is timing of taxes. With a traditional IRA, you get a potential tax break now and pay taxes on withdrawals later. With a Roth IRA, you pay taxes now and enjoy tax-free withdrawals later. Traditional IRAs also have RMDs; Roth IRAs do not during the owner's lifetime. Your current versus expected future tax rate should guide your choice.
Frequently asked questions
Can I contribute to a traditional IRA if I already have a 401(k)?
Yes, you can contribute to both. However, if you or your spouse participate in a workplace plan, your traditional IRA deduction may be limited or eliminated based on your income. Non-deductible contributions are still allowed up to the annual limit.
What is the deadline for making a traditional IRA contribution?
You can make IRA contributions for a given tax year up until the tax filing deadline — typically April 15 of the following year. This gives you additional time to contribute after the calendar year ends.
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Related terms
Roth IRA
A Roth IRA is an individual retirement account where you contribute after-tax dollars and your investments grow tax-free, with tax-free withdrawals in retirement.
Rollover IRA
A rollover IRA receives funds transferred from an employer-sponsored retirement plan like a 401(k), preserving tax-deferred status while giving you control over investment choices.
Required Minimum Distribution (RMD)
A required minimum distribution (RMD) is the minimum amount the IRS requires you to withdraw annually from most retirement accounts starting at age 73.
Backdoor Roth IRA
The backdoor Roth is a strategy that allows high-income earners who exceed Roth IRA income limits to make Roth contributions indirectly through a traditional IRA conversion.
Spousal IRA
A spousal IRA allows a working spouse to contribute to an IRA on behalf of a non-working or low-earning spouse, helping couples maximize retirement savings together.
Catch-Up Contributions
Catch-up contributions allow workers aged 50 and older to contribute extra money to retirement accounts beyond standard annual limits, helping them accelerate savings before retirement.