How does a traditional IRA work?



An individual retirement account—or IRA—is a personal savings plan that offers certain tax benefits. Traditional IRAs are one type of IRA. Contributions to a traditional IRA may be tax-deductible (often depending on your income and whether you or your spouse are covered by a retirement plan at work), and any earnings in your traditional IRA are not taxed until you take them out.

When you take money out of a traditional IRA, you may have to pay income tax on the amount you withdraw. You may also have to pay a 10% federal penalty tax on early withdrawals, unless you meet certain conditions.

You can set up and contribute to a traditional IRA if you have earned income and you’re under age 70½. As long as you have money in your traditional IRA, you can keep making contributions.

There’s no limit to how much you can contribute to a traditional IRA each year. But there are contribution limits for other types of IRAs. For 2019, the contribution limit for a traditional IRA is $6,000 ($7,000 if you’re age 50 or older).

You can open a traditional IRA at a bank, credit union, brokerage firm, or other financial institution.



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How do you take a loan from your traditional IRA?

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Can you rollover a traditional IRA into another retirement account?

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What are the penalties for withdrawing money from a traditional IRA early?

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Who is eligible to contribute to a traditional IRA?

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When can you start withdrawing money from a traditional IRA?

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Can you change the beneficiary of your traditional IRA?

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How are traditional IRA withdrawals taxed?

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How long can you contribute to a traditional IRA?

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How does a traditional IRA work?

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