Traditional IRAs might not be for everyone. But they could be for you.
A Traditional Individual Retirement Account (IRA) lets you save for retirement with potential tax advantages. Contributions may be tax-deductible, and your investments grow tax-deferred until you withdraw funds in retirement. This can help reduce your taxable income today while allowing your savings to compound over time. Unlike a Roth IRA, where withdrawals in retirement can be tax-free, Traditional IRA withdrawals are generally taxed as ordinary income.
| Qualifications: | Must have earned income. There are no age restrictions. |
| Maximum Contributions: | 2024: $7,000 2025: $7,000 Plus $1,000 "catch-up" contribution (if age 50 or over during the year) |
| 2024 Contribution Deadline: | April 15, 2025 |
| Tax Status of Earnings: | Tax-deferred until withdrawal |
| Nonrefundable Tax Credit: | You may be eligible to receive a credit (not to exceed $1000 or $2000 for married couples filing jointly) on your contribution if you meet certain requirements. |
| Contribution Restrictions: | None if you have earned income. However, if you are an active participant in an employer retirement plan, your contribution may not be deductible (see tax-deduction information below). |
| Tax Deduction: | Yes (See Traditional IRA tax-deduction explanation below) |
| IRS Penalties for Early Withdrawal: | None if:
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| Required Distributions: | Prior to the SECURE 2.0 Act, the RMD age began at age 72. If you turn age 72 in 2023 or later, you can now wait until age 73 to begin taking RMDs. If you already turned 73 on January 1, 2023, or later, RMDs cannot be delayed under the new rule. In other words, all Traditional IRA owners born on or before December 31, 1950 are subject to the old rule, which makes the 72nd year the first Required Minimum Distribution year. |
| Contribution Age Limit: | None. |
Contributions up to the limit are fully tax-deductible if you are not an active participant in an employer-sponsored retirement plan.
If you are an active participant and a single tax filer, your deductibility phase-out range for tax year 2025 is $79,000 - $89,000 up from $77,000 - $87,000 in 2024.
If you are married and filing a joint return, your deductibility phase-out range for tax year 2025 is $126,000 - $146,000, up from $123,000 - $143,000 in 2024.
Note: For an IRA contributor who is not an active participant and is married to someone who is an active participant, the deductibility phase-out range is $236,000 - $246,000 for 2025, up from between $230,000 - $240,000 in 2024.
Traditional and Roth IRAs are separately insured to $250,000 by the National Credit Union Administration, an agency of the United States Government. Coverdell Education Savings Accounts are insured under the same provisions as irrevocable trust accounts.
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