What is a Traditional IRA?
Traditional IRA enables individuals to save earned income for retirement until age 70½. Contributions can be tax deductible and taxes on earnings are deferred until the funds are withdrawn upon retirement. Traditional IRAs can be funded by an individual from his/her own savings, an employer on behalf of an employee or by rollovers received from qualified retirement plans.
With a Traditional IRA, contributions are tax deductible (for most people) and only subject to income taxes at the time of withdrawal. The main advantage of a Traditional IRA (compared to a Roth IRA), is that you may be able to save on your taxes today by deferring those taxes until retirement (when you will probably be in a lower tax bracket).
A Traditional IRA gives you the ability to set aside money for retirement by making tax-deferred contributions to a savings or investment account. Your contributions may also be tax-deductible. The money you’ve put into the account and any earnings are not taxed until you take the money out (called a distribution). In general, you can’t take the money out until age 59 or you will pay a penalty.
