Traditional IRA
An Individual Retirement Account funded with pre-tax dollars (deductible up to income limits if a workplace retirement plan is available) where growth is tax-deferred and withdrawals in retirement are taxed as ordinary income. Required Minimum Distributions begin at age 73.
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The Traditional IRA is the older of the two major US individual retirement account structures, predating the Roth IRA by 25 years. Contributions are made with pre-tax dollars and may be tax-deductible in the year of contribution (subject to income limits if the taxpayer or spouse is covered by a workplace retirement plan), growth compounds tax-deferred inside the account, and withdrawals are taxed as ordinary income at the federal level — and at the state level depending on residence. The structure is functionally a tax deferral: you defer tax now in exchange for tax later.
Annual contribution limits in 2026 are identical to the Roth IRA: $7,500 for those under 50 and $8,600 for those 50 and over, with the aggregate cap applying across both IRA types. Deductibility limits, however, are different from Roth eligibility limits and depend on whether the taxpayer or their spouse is covered by a workplace retirement plan. A single filer with no workplace plan can deduct the full contribution regardless of income. A single filer covered by a workplace plan loses the deduction in phase-out between $81,000 and $91,000 of MAGI (2026 figures; the married-filing-jointly phase-out when the contributing spouse is covered runs $129,000 to $149,000). Joint filers have different phase-outs depending on which spouse is covered. The IRS publishes the current phase-out schedule each year.
Required Minimum Distributions (RMDs) are a defining feature of the Traditional IRA structure. Starting in the year you turn 73, the IRS requires you to withdraw a percentage of your Traditional IRA balance each year based on a life-expectancy table. The percentage starts around 3.7% at age 73 and rises with age. The reason for RMDs is that the deferred tax has to come due eventually — the federal government does not allow indefinite tax deferral inside a retirement account during the original owner's lifetime. RMDs apply to Traditional IRAs and to most workplace retirement plans (401(k), 403(b), etc.) but not to Roth IRAs during the original owner's lifetime.
The strategic comparison between Traditional and Roth IRAs is the central asset-location decision in US retirement planning. The bracket-aware framing: contribute to Traditional when your current marginal tax bracket exceeds your expected retirement marginal tax bracket, contribute to Roth when the reverse is true. The trickier nuances involve Social Security taxation thresholds, state tax differences between accumulation and retirement (a high-tax-state worker who plans to retire to a no-tax state has a stronger case for Traditional), Medicare IRMAA brackets, and the option value of Roth's lack of RMDs for legacy planning. Most retirees end up with both types of accounts and benefit from the optionality of choosing which to draw from in any given year.
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- Roth IRA An Individual Retirement Account funded with post-tax dollars where contributions are not tax-deductible, growth is tax-free, and qualified withdrawals after age 59½ are tax-free. Subject to annual contribution limits and income-based phase-outs.
- 401(k) An employer-sponsored defined contribution retirement plan governed by Internal Revenue Code Section 401(k), allowing employees to defer pre-tax compensation (Traditional 401(k)) or post-tax compensation (Roth 401(k)) into investment options selected by the plan. The largest US retirement savings vehicle by assets.
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