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Retirement, Investments, & Insurance for Individuals Invest & Retire Individual Retirement Accounts (IRAs) Traditional IRA

Traditional IRA

Traditional IRA

Deduct your contributions up front to reduce your taxable income, and allow your earnings to grow tax-deferred.

What is a traditional IRA?

A traditional IRA is an Individual Retirement Account (IRA) where you can save for retirement and benefit from tax deferred growth on your investments. Contributions are usually made with after-tax money, though they may be tax deductible if your income qualifies.

A traditional IRA can be a good choice for people who expect they'll be in the same or a lower tax bracket when they retire.

How does a traditional IRA work?

Experience tax savings when you contribute:

You can deduct your contributions, up to a certain amount, from your federal taxes if you meet the IRA income limits.

Plan for the future with tax-deferred growth:

When you withdraw your money, you'll be taxed based on your income at that time.

Consolidate other qualified accounts in an IRA:

So your savings are in one spot, which can help streamline your retirement savings.

What are the contribution rules?

As long as you have earned income, you can contribute to a traditional IRA. There are no income limits.

Retirement contribution limits and income ranges

Already have a 401(k)?

Although 401(k)s (retirement plans through an employer) and IRAs (retirement plans you own yourself) are similar in that both are used to save money for retirement, they each have their own distinct rules for contributing. However, if you or your spouse participate in an employer-sponsored plan like a 401(k), your traditional IRA contributions may not be tax-deductible, depending on your income level.

That means you may be able to contribute to either or both each year, up to the maximum contribution limits for each.

Can you move your money from a traditional IRA to a Roth IRA?

The short answer is yes, but there are some important considerations to that decision, namely it cannot be undone. Please consult a tax professional in order to understand the tax implications.

Learn more about Roth IRA conversions

Traditional or Roth IRA

Traditional IRA

Roth IRA
How does it work? A traditional IRA lets you deduct savings contributions from your taxes, which lowers your taxable income for the year -- but you pay taxes on the money when you withdraw it in retirement. A Roth IRA uses after-tax money, meaning you pay taxes on your contributions at the time you put the money in and, future withdrawals are tax free as long as you follow Roth IRA rules.
Are there income limitations? You must have earned income, but there’s no maximum limit. To contribute the full amount allowed by the IRS in 2024, your Modified Adjusted Gross Income (MAGI) must be below:
  • $146,000 for a single tax filer.
  • $230,000 for a joint tax filer.
How much can you contribute? Up to $7,000; if you’re 50 or older, you can contribute an additional $1,000 in 2024.
When do you pay taxes? In retirement, when you withdraw your savings. Up front, before you contribute. Your earnings then grow tax free. There are no taxes or penalties on withdrawals made after age 59½.
What are the rules about withdrawals?

You can withdraw contributions and earnings penalty-free at age 59½, or earlier for certain hardships. You have to start taking required minimum distributions after age 73.

You can withdraw contributions at any time, without penalty. You can withdraw earnings, penalty-free at age 59½, or earlier for certain hardships, as long as you've followed the rules of a Roth IRA. You're not required to withdraw your money at any age.

Ready to get started?

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Footnotes

Deductibility of contributions is dependent upon coverage by an employer-sponsored retirement plan for you or your spouse and your Modified Adjusted Gross Income (MAGI). Subject to IRS income and deduction limits. Your account must be open for 5 years and you must be over 59 ½ to be eligible for qualified  tax-free withdrawals of earnings.

Investment and Insurance products are:

  • Not Insured by the FDIC or Any Federal Government Agency
  • Not a Deposit or Other Obligation of, or Guaranteed by, 51³Ô¹ÏºÚÁÏ Bank or Any Bank Affiliate
  • Subject to Investment Risks, Including Possible Loss of the 51³Ô¹ÏºÚÁÏ Amount Invested

This document is intended to be educational in nature and is not intended to be taken as a recommendation. 

When deciding between an employer-sponsored plan and an IRA you should consider the differences in investment options and risks, fees and expenses, tax implications, services and penalty-free withdrawals for your various options. The organization’s retirement plan investment options may have investment expenses lower than similar investment options offered outside the plan. There may be other factors to consider due to your specific needs and situation. You may wish to consult your tax advisor or legal counsel.