The workhorse retirement account: a deduction now for many savers, tax-deferred growth, and a bill that comes due when you withdraw.
Key takeaways
- Contributions may be deductible depending on income and workplace-plan coverage.
- Balances grow tax-deferred; withdrawals are generally taxed as ordinary income.
- Required minimum distributions begin at the applicable age.
What it is
Tax-deferred retirement saving, with possible deductions. The account is a structure; the investments it holds are separate and carry their own risks.
Who it’s for
- Savers who want a potential deduction today
- Those expecting a lower tax rate in retirement
- People consolidating old workplace plans by rollover
- Investors prepared to manage RMDs later
How it works
- Open and fund a Traditional IRA by contribution, transfer, or rollover.
- Investments grow tax-deferred.
- Withdrawals in retirement are taxed as ordinary income.
Eligibility
Available to those with earned income; deductibility depends on income and whether you or a spouse is covered by a workplace retirement plan.
Contributions and funding
$7,500 (under 50) or $8,600 (50+, including the $1,100 catch-up) for 2026, across all IRAs combined. Deductibility phases out (if covered by a workplace plan) at $81,000–$91,000 (single) and $129,000–$149,000 (married filing jointly). 2026 tax year
A worked example
Deduct a $7,500 contribution this year if eligible, let it grow tax-deferred, and pay ordinary income tax as you withdraw in retirement. If you also made nondeductible contributions, that basis is tracked on Form 8606 so the same dollars are not taxed twice.
What it can hold
Publicly traded securities and, in a self-directed model, permitted alternative assets.
Taxes and reporting
Deductible contributions and earnings are taxed when withdrawn; nondeductible contributions create basis tracked on Form 8606. Requires tax review
Withdrawals and distributions
Withdrawals are ordinary income; the 10% additional tax may apply before 59½ unless an exception applies. RMDs begin at the applicable age.
How Investor Services custodies it
Investor Services holds the account and processes the rollovers, contributions, and distributions you direct, reporting them as a custodian must. Whether and when to contribute or withdraw is your decision.
Risks and limitations
- Early withdrawals can be taxed and penalized
- RMDs must be taken on time to avoid an excise tax
- Investment risk, including loss of principal
Common mistakes to avoid
- Missing a required minimum distribution after the applicable age
- Assuming the contribution is deductible when workplace-plan coverage limits it
- Failing to track nondeductible basis on Form 8606
- Taking early withdrawals that trigger the additional tax
Frequently asked questions
When do RMDs start?
At the age set by current law. Use our RMD guidance and confirm your applicable age. Requires tax review
Can I deduct my contribution?
Sometimes — it depends on income and workplace-plan coverage.
Can I roll over a 401(k) into this?
Often yes, via a direct rollover. See our rollovers guide.
Educational only. This page is general information, not individualized investment, legal, or tax advice. Rules depend on your account type, transaction, tax year, and circumstances — consult a qualified professional.