Traditional IRA

What It Means

A traditional IRA (individual retirement account) is a retirement account you open yourself at a bank, brokerage or fund company, apart from any job. Contributions may be deductibleInsurance deductibleThe part of a covered loss you pay yourself before your home, renters or auto insurance pays the rest, set as a dollar amount or a percentage. See more on your tax return, depending on your income and whether you or your spouse have a retirement plan at work. The money grows without yearly tax, and withdrawals are taxed as ordinary income.

How People Say It

• "I put $7,500 in my IRA before the deadline."
• "Is my IRA contribution deductible this year?"
• "That's all in a traditional IRA, so it's taxed when I take it out."

The Breakdown

Worked example. Maria and Tom file jointly with modified adjusted gross incomeGross incomeThe full amount you earn before taxes and other deductions come out. For federal taxes, it's all income you receive unless a law exempts it. See more of $200,000. Tom has a 401(k)401(k)A retirement plan run through an employer that lets you put part of each paycheck into investments, before tax or as Roth, up to a yearly IRS limit. See more at work; Maria has no plan at her job. Maria puts $7,500 into a traditional IRA for 2026.

What the result means. The $7,500 comes off their taxable income for 2026. Income tax is paid later, when Maria withdraws the money. Had their income been $247,000, the deduction would have been partial, and at $252,000 or more it would be zero, though she could still contribute.

The 2026 limits, from the IRS. $7,500, or $8,600 at age 50 and up with the $1,100 catch-up, and never more than your taxable compensation for the year.

Good to Know

The IRS limit covers all your IRAs together, traditional and Roth, so $7,500 is the total for 2026 whichever mix you choose. Withdrawals before age 59½ generally owe a 10% additional taxEarly withdrawal penaltyThe IRS 10% additional tax on money taken from a 401(k), IRA or similar account before age 59½, unless an exception applies. See more on top of income tax unless an exception applies (IRS Topic 557). A traditional IRA also carries required minimum distributions later in life; the IRS RMD page gives the starting age that applies to you. The deduction rules for people covered at work depend on filing statusFiling statusThe category you file your federal return under, one of five the IRS sets, which decides your tax rates and standard deduction and depends on your marital status at year end. See more, so check the IRS 2026 table or ask a tax professional.

Related Terms and Categories

• Roth IRA

  An individual retirement account funded with after-tax money, where qualified withdrawals, earnings included, come out tax-free.

• Spousal IRA

  An IRA for a married person with little or no pay of their own, funded on a joint return using the working spouse's income.

• Rollover IRA

  An IRA opened to receive money moved out of a workplace retirement plan such as a 401(k), usually after leaving a job.

• Contribution limit

  The most the IRS lets you put into a tax-advantaged account in a year, such as a 401(k), IRA or HSA, often with a higher catch-up amount at older ages.

• Early withdrawal penalty

  The IRS 10% additional tax on money taken from a 401(k), IRA or similar account before age 59½, unless an exception applies.

• Tax-advantaged account

  An account the tax code rewards, such as a 401(k), IRA, HSA or 529 plan, where taxes are cut, delayed or skipped if you follow its rules.

Saving and investing basics