Traditional IRA — overview and eligibility
A Traditional IRA is a tax-deferred retirement account where your contributions may be tax-deductible today and your distributions are taxed later — this article covers who can contribute, how the tax rules work, and what to expect over the life of the account.
Steps / Explanation
A Traditional Individual Retirement Account (Traditional IRA) is a retirement account defined by the Internal Revenue Service (IRS) that lets eligible individuals contribute earned income on a potentially tax-deductible basis. Investments inside the account grow tax-deferred — meaning you do not pay tax on interest, dividends, or capital gains as they accrue — and you pay ordinary income tax on distributions when you take them out in retirement.
At Retired.com, a Traditional IRA is held as a Self-Directed IRA (SDIRA), which means you choose the investments rather than picking from a broker's pre-approved menu. The Traditional IRA tax rules are identical whether the account is held at a standard brokerage or as an SDIRA with Retired.com — what changes is the range of assets you can hold inside it.
Who can contribute
You can contribute to a Traditional IRA if you (or, in the case of a joint filer, your spouse) have earned income for the tax year. Earned income includes wages, salaries, tips, self-employment income, and certain other forms of compensation. Investment income, Social Security, and pension payments do not count.
The SECURE Act of 2019 removed the previous age cap of 70½ on Traditional IRA contributions. Today, there is no upper age limit — as long as you or your spouse have earned income, you can continue contributing.
There is no minimum income requirement. Individuals of any income level can contribute, though the deductibility of those contributions (covered below) does phase out at higher incomes when you or your spouse are covered by a workplace retirement plan.
Contribution limits
The IRS sets annual contribution limits that are indexed to inflation and published each year in IRS Publication 590-A. Key points:
The annual limit applies across all of your Traditional and Roth IRAs combined — you cannot contribute the full limit to each.
Individuals age 50 or older can make catch-up contributions above the standard limit. The catch-up amount is also set annually by the IRS.
Contributions for a tax year can generally be made up to the federal tax-filing deadline (usually April 15) of the following year.
Because these numbers change annually, we do not publish specific dollar figures in this article. For the current year's limits, see IRS Publication 590-A or "Contributions — limits, deadlines, and how to make them", which is kept current.
Tax treatment — deduction, growth, and distribution
A Traditional IRA has three tax events to understand:
On contribution. Depending on your income and whether you or your spouse are covered by a workplace retirement plan, some or all of your contribution may be deductible from your federal income taxes for that year. If neither you nor your spouse is covered by a workplace plan, the contribution is generally fully deductible regardless of income. If either of you is covered, a phase-out range applies — again, the current-year thresholds are in IRS Publication 590-A.
During growth. Investment earnings inside the account — interest, dividends, capital gains — are not taxed as they accrue. This is called tax-deferred growth.
On distribution. When you take money out of a Traditional IRA in retirement, the distribution is taxed as ordinary income in the year you receive it. This is the key difference from a Roth IRA, where qualified distributions are tax-free. See "Roth IRA — overview and eligibility" for the comparison.
We recommend consulting a tax advisor or attorney for guidance specific to your situation.
Distributions, early withdrawals, and RMDs
Qualified distributions begin at age 59½. Distributions taken before that age are generally subject to an additional 10% early-withdrawal tax on top of the ordinary income tax, with certain IRS-defined exceptions (first-time home purchase, qualified higher-education expenses, certain medical expenses, and others).
Required Minimum Distributions (RMDs) apply to Traditional IRAs. Under the SECURE 2.0 Act, the age at which RMDs begin is 73 or 75 depending on your year of birth. For the full schedule and calculation rules, see "Required Minimum Distributions (RMDs) — rules and deadlines".
Traditional IRA vs. Roth IRA — the short version
The simplest way to compare: a Traditional IRA generally gives you a tax deduction today and taxes you later; a Roth IRA gives you no deduction today but lets qualified withdrawals come out tax-free later. Which one fits your situation depends on your current tax bracket, your expected bracket in retirement, and your income. See "Roth IRA — overview and eligibility" for the Roth side of this comparison.
Common questions
Can I contribute to both a Traditional IRA and a Roth IRA in the same year?
Yes, as long as your combined contributions across all your IRAs stay within the IRS's annual limit. Roth contributions are also subject to income-based eligibility rules, which Traditional IRA contributions are not. See "Roth IRA — overview and eligibility" and "Contributions — limits, deadlines, and how to make them".
Do I have to deduct my contribution?
No. You can choose to make a non-deductible contribution to a Traditional IRA. Non-deductible contributions create "basis" in the account, which affects how future distributions are taxed. Basis tracking is the account holder's responsibility and is reported on IRS Form 8606. We recommend consulting a tax advisor or attorney for guidance specific to your situation.
Can I roll over a 401(k) into a Traditional IRA at Retired.com?
Yes. Rollovers from an employer-sponsored plan into a Traditional IRA are common and are not subject to the annual contribution limit. See "Rollovers — moving funds from a 401(k) or employer plan" for the process.
What investments can I hold inside a Traditional IRA at Retired.com?
Because Digital Trust, the custodian for your account, supports Self-Directed IRAs through the Retired.com platform, you can hold a wider range of assets than at a conventional brokerage. The IRS does prohibit certain assets (collectibles, life insurance, and others) in any IRA — see "Investment restrictions in an IRA". Your Account Representative can help with account setup and walking through the options available to you.
Need more support? Contact our Service team
Select "Start a Conversation" from the Chat menu or call us at 1-800-RETIRED