Traditional IRAs

Saving and investing in a Traditional IRA may be an effective way to reduce current income tax obligations. Traditional IRAs offer tax-deferred growth of your account while allowing you deduct all or part of your contributions from your taxable income.

A Traditional IRA may benefit you because:

  • Some or all of your annual contributions may be tax-deductible, reducing your taxable income.
  • The deductible contributions in your account will only be taxed at the time of withdrawal – a time when many investors are in a lower tax bracket.
  • There are no income limits for contributing to a Traditional IRA, although all contributions might not be deductible.

Key Features of Traditional IRAs

Tax Advantages

  • Tax-deferred growth potential.
  • You generally pay taxes when you make withdrawals, at which time you may be in a lower tax bracket.
  • Your contributions may be tax-deductible if you or your spouse does not participate in an employer-sponsored plan.



  • Taxable: All withdrawals from a Traditional IRA (except for amounts attributable to nondeductible contributions) are generally taxed as ordinary income.
  • Required Minimum Distributions: You must begin taking required minimum distributions by April 1 of the year following the year in which you reach age 72.
  • A 10% early withdrawal penalty may be due to the IRS for distributions taken prior to attaining Age 59½.

Are my Traditional IRA Contributions Tax-Deductible?

You are eligible for a fully deductible IRA contribution if neither you nor your spouse participates in an employer-sponsored retirement plan. Your ability to deduct your full IRA contribution may be limited by your income if either of you do participate in a plan. Check the chart below to see if any part of your Traditional IRA contribution will be deductible at your income level.

Click here to determine if your contribution will be deductible (PDF).

What are the exceptions to the 10% Early Withdrawal Penalty?

The 10% penalty tax for withdrawals made before age 59½ is waived in the following cases:

  • Death
  • Disability
  • First-time home purchase up to $10,000
  • Qualified medical expenses
  • Qualified higher education expenses
  • Health insurance premiums while unemployed (for at least 12 weeks)
  • A series of Substantially Equal Periodic Payments
  • Conversion of a Traditional IRA to a Roth IRA
  • Qualified reservist distribution
  • Creditor access/IRS levy in a civil suit

Roth IRAs →