Traditional IRA

What is a Traditional IRA?

A Traditional IRA is an individual retirement account. This tax-advantaged vehicle allows individuals to make contributions and deduct those contributions from their taxable income. The earnings also grow tax-deferred until withdrawals are made in retirement. There is no age requirement or income limit to contribute to a Traditional IRA; however, there are contribution limits and withdrawal rules.

• Eligibility

  •No age requirement

  •Must have earned income (wages, salary, self-employment income)

• Contribution Limits

  •$6,000 per year if under age 50

  •$7,000 per year if age 50 or over

  (contribution limits apply to IRAs and Roth IRAs in the aggregate)

• Withdrawals

  •59½ and under: Taxes and 10% penalty

  •59½ to 72: Taxes and no withdrawal penalty

  •72 & over: Taxes applyand distributions are required by law (called required minimum distributions or RMDs)

• Taxes

  •Contributions are made with pre-tax dollars, meaning the amount can be deducted from your taxable income

  •Money grows tax-deferred; however, withdrawals will be taxed as ordinary income.