An individual retirement account that offers tax deferred earning and possible tax deductions. You may be able to deduct contributions in whole or in part. All earnings are tax deferred until withdrawn.
- If you put $500 into a Traditional IRA, all $500 goes into the IRA, while possibly counting as a tax deduction on that year’s taxes.
- The $500 – and additional money you deposit each year – will grow through interest and other investments in the IRA.
- When you begin to withdraw money from your IRA, let’s say $1,000, you will be subject to taxes on that amount.
- Contributions will not be taxed and may be tax-deductible depending on your modified adjusted gross income and other factors.
- You are not allowed to make any more contributions to your Traditional IRA when you reach age 70½.
- Each year, you may contribute up to $5,500 (or $6,500 if 50 or older) of earned income.
- You are required to begin withdrawing from your Traditional IRA at age 70½.
- The money you withdraw will be subject to taxes.