A retirement account where contributions may be tax-deductible; withdrawals are taxed.
A Traditional IRA is a personal retirement savings account offering tax-deductible contributions and tax-deferred growth. For 2024, you can contribute up to $7,000 annually ($8,000 if age 50+). Contributions are tax-deductible in the year made (if you don't have a workplace 401(k), or even if you do, depending on income). The account grows tax-deferred; you pay taxes on withdrawals in retirement at ordinary income rates. Required Minimum Distributions (RMDs) start at age 73. Traditional IRAs are ideal if you want immediate tax deductions, expect lower tax rates in retirement, or have high earned income. Early withdrawals before age 59.5 face a 10% penalty plus income tax. Traditional IRAs offer tax deductions but don't offer the flexibility and tax-free withdrawals of Roth IRAs.