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Traditional IRAs

When you invest in a Traditional IRA, your contributions may be tax deductible, and your contributions and earnings accumulate tax-deferred. You don't pay taxes until you withdraw funds from your account. This means that the money you would have otherwise paid in income taxes can stay in the account working hard for you.

 

Contributions

Traditional IRAs may invest in different types of investments, including stocks, bonds, certificates of deposit (CDs), and mutual funds.

The maximum you can contribute annually is $5,500 ($6,500 if you're over age 50). This is the combined limit across all IRAs you own. Contributions to a Traditional IRA may be deductible on your federal tax returns. Please see the the categories below, which vary based on different situations.


Eligibility & Deductibility

If you have earned income, you can contribute to a Traditional IRA up to the year you turn 70½, regardless of your income. 

Your ability to deduct your contributions depends on your filing status, the modified adjusted gross income (MAGI) shown on your 1040 tax return, and whether you are eligible to participate in a retirement plan at work. 

  1. If you have no retirement plan at work:
    • Your deduction is allowed in full if you (and your spouse, if you are married) aren’t covered by a retirement plan at work.
  1. If you are covered by a retirement plan at work:
    • Your deduction may be limited if you are covered by a retirement plan at work and your income exceeds certain levels
    • If you're covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction:
If Your Filing Status Is... If Your Filing Status Is... Then You Can Take...
Single or Head of household
$63,000 or less a full deduction up to the amount of your contribution limit.
more than $63,000 but less than $73,000 a partial deduction.
$73,000 or more no deduction.
Married filing jointly or qualifying widow(er)
$101,000 or less a full deduction up to the amount of your contribution limit
more than $101,000 but less than $121,000 a partial deduction.
$121,000 or more no deduction.
Married filing jointly or qualifying widow(er)
less than $10,000 a partial deduction.
$10,000 or more no deduction.
  1. If you are not covered by a retirement plan at work, but your spouse is covered by a retirement plan at work:
    • Your deduction may be limited if your spouse is covered by a retirement plan at work and your income exceeds certain levels
    • If your spouse is covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction:
If Your Filing Status Is... And Your Modified AGI Is... Then You Can Take...
Married filing jointly with a spouse who is covered by a plan at work
$189,000 or less a full deduction up to the amount of your contribution limit.
more than $189,000 but less than $199,000 a partial deduction.
$199,000 or more no deduction.
Married filing separately with a spouse who is covered by a plan at work
less than $10,000 a partial deduction.
$10,000 or more no deduction.


Withdrawals

Funds may be withdrawn from a traditional IRA at any time. Any previously untaxed portion of your investment are subject to ordinary income taxes. If you're under the age of 59½, you'll also be subject to an additional 10% federal income tax penalty, unless your withdrawal is taken for one of the following reasons:

  • Qualified first-time home purchase (up to $10,000 per lifetime)
  • Death or disability
  • Qualified higher education expenses, which generally include tuition, books, supplies, equipment at an eligible educational institution
  • Medical expenses in excess of 10% of adjusted gross income (AGI), or 7.5% if you or your spouse were born before Jan. 2, 1951
  • Payment of health insurance premiums if unemployed
  • Substantially Equal Periodic Payments (SEPP), a plan that allows you to take annual distributions for five years or until you turn 59½, whichever comes last

Retirement Planning

Financial planning can be complex. We provide information and strategies to help you navigate the world of investing.

Learn more >


This information is written in connection with the promotion or marketing of the matter(s) addressed in this material.

The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice.

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