Traditional IRAs
Take advantage of tax-deferred growth for your retirement investments while lowering your taxable income.
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
Tax-deferred growth
You won't pay taxes on deductible contributions or investment gains until you withdraw the money in retirement. This can help your savings grow faster.
Tax deductible contributions
The money you contribute to a traditional IRA can be deducted from your taxable income. Your eligibility for a deduction may change if you participate in an employer plan.
Traditional IRA income limits
There are no income limits for contributing to a traditional IRA. However, to be able to deduct contributions from your taxes, your modified adjusted gross income must be less than the annual limit set by the IRS.
Spousal IRA advantage
Nonworking spouses have access to the tax benefits that traditional IRAs offer. Spouses who earn little or no income can still save for retirement by opening a spousal IRA.
Traditional IRA rules and considerations
Contribution limits
For 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. For 2026, the maximum annual contribution limit for a traditional IRA is $7,500 for those under age 50 and $8,600 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 73.2
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.
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Traditional IRA options
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Frequently asked questions
What is the difference between a traditional IRA and a 401(k)?
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.
How does a traditional IRA work?
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.
How do you contribute to a traditional IRA pre-tax?
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."
What is the difference between traditional and Roth IRAs?
The core difference between traditional and Roth IRAs lies in the timing of the tax benefit.4
- 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).
Deciding whether a Roth or traditional IRA is better for you depends on several factors:
Is a rollover IRA a traditional IRA?
A rollover IRA is a type of traditional IRA that holds money moved from a qualified employer-sponsored plan.
Is a SIMPLE IRA the same as a traditional IRA?
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.
What is the difference between a SEP-IRA and a traditional IRA?
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.
Can I move my money from a traditional IRA to a Roth IRA?
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.
Deductions can vary according to your modified adjusted gross income (MAGI).
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Due 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.
Withdrawals 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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All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account.
Vanguard Fiduciary Trust Company serves as the custodian of Vanguard IRAs.
Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.
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