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traditional ira

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Financial Dictionary

Traditional IRA

An IRA that is not a Roth IRA or a SIMPLE IRA. Individual taxpayers are allowed to contribute 100% of compensation (Self-employment income for Sole proprietors and partners) up to a specified maximum dollar amount to their Traditional IRA. Contributions to the Traditional IRA may be tax-deductible depending on the taxpayer's income, tax-filing status, and coverage by an employer-sponsored retirement plan.

Investopedia Commentary

Eventual withdrawals are treated as ordinary income and may be subjected to income tax. However, since your income is likely less once you retire, you may be taxed at a lower rate.

Related Links

Introductory Tour through Retirement Plans
Roth Or Traditional IRA...Which Is The Better Choice?
Traditional IRA Deductibility Limits
Taking Penalty-Free Withdrawals From Your IRA

See also: IRA, Roth IRA, SEP, SIMPLE

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