Traditional IRA

A Traditional Individual Retirement Account (IRA) is one of the most common types of retirement savings accounts.

Better yet, 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). At the time of retirement, most individuals find themselves in a much lower tax bracket than they were while they were employed. This means that they pay a lower tax rate on those funds than they would have during the years they were placed in the account.

Income within a Traditional IRA account grows tax-deferred. Only when the funds are withdrawn from the account as a distribution will there be a potential tax liability.

Key Features

• Tax-Deferred
  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 That means that any gains are also tax-deferred until withdrawn from the account.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 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 you are under age 59 1/2, unless a penalty tax exception applies.

• Catch-Up Contributions 
  There is a “catch-up” period of which you may contribute $1,000 more to your account. This is only permissible if the account owner is age 50 or older.

• 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  Up to $10,000 can be withdrawn from a Traditional IRA penalty-free, if the money is used to acquire a principal residence for a first-time home buyer.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 a complete breakdown of the rules and regulations concerning Traditional IRAs. Certain restrictions apply regarding prohibited transactions.

Frequently Asked Questions

about Traditional IRAs