What is a traditional IRA?
A traditional IRA is a retirement savings account that offers up-front tax relief through tax-deductible contributions1 and tax-deferred growth. When you make withdrawals in retirement, they’re taxed as income.
Benefits of a traditional IRA
Traditional IRA rules and considerations
Contribution limits
For 2024 and 2025, the maximum annual contribution limit for a traditional IRA is $7,000 for those under age 50 and $8,000 for those age 50 and older.
No age limit on contributions
You can make contributions to a traditional IRA regardless of your age as long as you have earned income.
Required minimum distributions
You'll need to take required minimum distributions (RMDs) from your account by April 1st after you turn 73.3
Taxable withdrawals
Withdrawals from traditional IRAs are taxed as ordinary income. There may be penalties for early withdrawals. Check with a tax professional for more information.
Could you be saving more on your taxes?
Discover whether you qualify for traditional IRA tax deductions. Your modified adjusted gross income (MAGI) must be less than the annual limit set by the IRS.
Traditional IRA options
Some investors choose a do-it-yourself approach. Others prefer a little extra guidance.
Frequently asked questions
The core difference between traditional and Roth IRAs lies in the timing of the tax benefit.4
Deciding whether a Roth or traditional IRA is better for you depends on several factors:
- Current and expected future income levels: If you expect to be in a higher tax bracket in the future, a Roth IRA might be more beneficial, as it offers tax-free withdrawals.
- Age and retirement timeline: Younger investors might prefer a Roth IRA to benefit from tax-free growth over a longer period.
- Tax-filing status and income: This determines eligibility for deductions (traditional IRA) or contributions (Roth IRA).
A traditional IRA is a personal retirement account you open and fund yourself, with potential tax-deductible contributions and tax-deferred growth. A 401(k) is a workplace retirement plan with higher contribution limits that often includes employer matching contributions.
Contributions to a traditional IRA are tax-deductible in the year they are made, which can reduce your current taxable income. Withdrawals in retirement are taxed as ordinary income. Whether your contributions are deductible may depend on your income level and whether you or your spouse are covered by a retirement plan at work.
You don’t actually contribute "pre-tax," like you do when money is withheld from your paycheck before taxes. However, qualifying contributions are tax-deductible, lowering your taxable income. This effectively makes them "pre-tax."
A rollover IRA is a type of traditional IRA. It's used to hold funds rolled over from a qualified employer-sponsored plan.
No. While they share some similarities, a SIMPLE IRA is designed for small business owners and their employees, while a traditional IRA is designed for individuals. They have different contribution types and limits.
While they share many similarities, a SEP-IRA is designed for self-employed individuals or small business owners, allowing for much higher contribution limits. A traditional IRA is a personal retirement account designed for individual savings.
Yes. When you move money from a traditional IRA to a Roth IRA, it’s called a Roth conversion. You’ll generally pay taxes on the converted amount, but it can grow tax-free going forward.
If your income is too high to contribute directly to a Roth IRA, you can use the backdoor Roth IRA strategy. This involves making a nondeductible contribution to a traditional IRA and then converting it to a Roth IRA.
1Deductions can vary according to your modified adjusted gross income (MAGI).
2For the 10-year period ended June 30, 2025, 6 of 6 Vanguard money market funds, 75 of 102 Vanguard bond funds, 21 of 23 Vanguard balanced funds, and 171 of 193 Vanguard stock funds—for a total of 273 of 324 Vanguard funds—outperformed their peer-group averages. Results will vary for other time periods. Only funds with a minimum 10-year history were included in the comparison. (Source: LSEG Lipper) Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. View fund performance
3Due to changes to federal law that took effect on January 1, 2023, the age at which you must begin taking RMDs differs depending on when you were born. If you reached age 72 on or before December 31, 2022, you were already required to take your RMD and must continue satisfying that requirement. However, if you had not yet reached age 72 by December 31, 2022, you must take your first RMD from your traditional IRA by April 1 of the year after you reached age 73.
4Withdrawals from a Roth IRA are generally tax-free if you are over age 59½ and have held the account for at least five years; withdrawals of earnings taken prior to age 59½ or five years may be subject to ordinary income tax or a 10% federal penalty tax, or both. (A separate five-year period applies for each conversion and begins on the first day of the year in which the conversion contribution is made.)
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