Traditional IRA

What is it?

A Traditional IRA is an account that provides the opportunity for your earnings to grow tax-deferred until they are withdrawn in retirement and offers the potential for tax-deductible contributions.

Compare to a ROTH IRA

What are the unique benefits?

• Any earnings grow tax-deferred until withdrawn after 59½ at which time they are taxed at your current rate
• Contributions may be tax-deductible

Who is eligible?

Anyone under the age 70½ who has earned income equal to or greater than their IRA contribution amount.

• If you contribute to an employer-sponsored plan like a 401(k) or 403(b), you are still eligible to contribute to a Traditional IRA
• If you have no earned income but your spouse earns enough income to cover your contribution as well as their own you can contribute to a Traditional IRA

How much can I contribute?

If you are under age 50 you can contribute:
For 2007: $4000
For 2008: $5000
If you are age 50 or older you can make an additional $1,000 "catch-up" contribution each year.

Are my contributions tax-deductible?

Your contribution to a Traditional IRA may be fully tax-deductible if any of the following apply:

• Neither you nor your spouse participates in an employer-sponsored retirement plan.
• You participate in an employer-sponsored retirement plan and your modified adjusted gross income is under $53,000 as a single taxpayer or $85,000 as married taxpayers filing jointly.
• You do not participate in an employer-sponsored retirement plan, but your spouse does, and your joint modified adjusted gross income is no more than $159,000.

See Contribution Tax Deductibility Chart for more details.

What can I invest in?

A Traditional IRA allows you to choose from investment products such as mutual funds, stocks, bonds, and ETFs, as well as bank products like CDs and money market savings.

See Ways to Invest for more information.