Traditional IRA

A traditional IRA is an individual retirement account you open yourself — no employer needed — where contributions may be tax-deductible now and everything is taxed as ordinary income when withdrawn in retirement. It’s the mirror image of a Roth IRA, which taxes the money going in and nothing coming out.

The deduction is the headline benefit, but it phases out at moderate incomes if you (or a spouse) are covered by a workplace plan — the IRS publishes the current thresholds annually. Non-deductible contributions are still allowed and are the raw material of the “backdoor Roth” maneuver.

The rules with teeth: withdrawals before age 59½ generally cost income tax plus a 10% penalty (with specific exceptions), and required minimum distributions force taxable withdrawals starting in your 70s whether you need the money or not — a constraint Roth accounts don’t have.

Choosing between traditional and Roth is a bet on tax rates: deduct now and pay later rates (traditional) versus pay now and never again (Roth). Higher earners near peak tax brackets often favor traditional; early-career savers usually favor Roth. Both share the same annual contribution limit, and both are just containers — the growth comes from what you invest inside, which compounds identically either way (see the retirement calculator).