A Traditional individual retirement account (IRA) is one of the most common types of retirement savings accounts.
Contributions made into the account each year may provide a tax-deduction equivalent to the same amount contributed (subject to government guidelines and income limitations). In retirement, most individuals find themselves in a lower tax bracket than when they were employed. This means they pay a lower tax rate on funds withdrawn from their account than they would have during the years the funds were invested in the account.
Any earnings within a traditional IRA account grow tax-deferred. Only when the funds are withdrawn from the account as a distribution will there be a potential tax liability.
One of the most notable benefits of a traditional IRA is the fact that funds are tax-deferred while in the account. That means that any gains are also tax-deferred until withdrawn from the account.
- Tax deductible
Contributions to a traditional IRA may be tax deductible, provided you meet certain requirements.
- Required distributions
Another important factor when considering traditional IRAs is the required minimum distribution (RMD) requirement when you turn age 72.
- Distribution penalties
Keep in mind that distributions from your IRA can be subject to a 10% early distribution penalty tax if taken before age 59 1/2, unless a penalty tax exception applies.
- Catch-up contributions
For account owners age 50 and older, a “catch-up” provisions allows an additional contribution of $1,000.
- First-time home buyer
Up to $10,000 can be withdrawn from a traditional IRA penalty-free, if the money is used to acquire a principal residence for a first-time home buyer. The owner of the home must be the traditional IRA’s owner, their spouse, or their lineal ancestors and descendants. The individual cannot have owned a home in the previous 24 months.
NOTE: Please visit www.irs.gov for complete rules and regulations regarding traditional IRAs. Certain restrictions apply regarding prohibited transactions.
It’s easy to get started investing in a traditional IRA. Open an account in just a few minutes on our online portal.
Frequently Asked Questions
about traditional IRAs
What are the fees for opening a Traditional IRA?
Most custodians of traditional assets collect fees and/or commissions based off of the amount of trades or recommendations of investment choices. Provident Trust Group offers a flat-rate annual fee.
View our fee schedule for full, transparent breakdown of our fees.
What is the maximum allowable contribution?
Our COLA limits document provides a comprehensive overview of how much you can contribute to your Traditional IRA.