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 Only when the funds are withdrawn from the account as a distribution will there be a potential tax liability.
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 That means that any gains are also tax-deferred until withdrawn from the account.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Up to $10,000 can be withdrawn from a Traditional IRA penalty-free, if the money is used to acquire a principal residence for a first-time home buyer.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.
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 involved with 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 are the contribution (COLA) limits?
Our COLA limits document provides a comprehensive overview of how much you can contribute to your Traditional IRA.