A Traditional Individual Retirement Account (IRA) may provide you significant, immediate tax savings and, due to the deferral of all taxes on earnings, the power of compound earnings is strengthened.
You can contribute to a Traditional IRA if you earn compensation and will not reach age 70½ by the end of the year. Earnings in a Traditional IRA are not taxed until they are withdrawn. The ability to defer taxes on the earnings, and to withdraw in a year when you may be in a lower tax bracket, can mean more after-tax dollars for your retirement.
You can invest up to $6,500 per year in a Traditional IRA account (or up to $7,500 if you are 50 or older).
You are eligible for penalty-free withdrawals from your Traditional IRA once you are age 59½ or older. Once you reach age 70½ you must take a required minimum distribution (RMD) every year. At 70½, you are also no longer eligible to contribute to a Traditional IRA (consider a Roth IRA if you would like to make contributions past this age).
With a Traditional IRA:
- Earnings accumulate tax deferred
- Contributions are tax deductible if you qualify
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