Traditional IRA


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Traditional IRA

A tax-deferred individual retirement account that allows annual contributions of up to $2000 for each income earner. Contributions are fully deductible for all individuals who are not active participants in employer-sponsored plans or for plan participants within certain income ranges.

Traditional IRA

An investment retirement account in which a worker makes tax deductible contributions up to a certain limit throughout his/her working life. Unlike Roth IRAs, contributions are tax deductible but withdrawals are taxed, effectively deferring tax on the account until the worker begins making withdrawals in retirement. Importantly, however, tax deductibility of contributions depends on one's tax bracket. The limit to annual contributions varies by year and is indexed to inflation. Traditional IRAs are allowed to invest in securities and, in practice, normally own common stock and certificates of deposit. See also: 401(k).
References in periodicals archive ?
Going forward, she will have another RMD due each subsequent December for as long as she has money in her traditional IRA.
She rolls the entire amount into a traditional IRA, maintaining the tax deferral.
Still, one would think it would follow on the coattails of the traditional IRA rollover.
At year-end 2015, 31% of these investors were under age 40, whereas only 16% of traditional IRA investors were in that age bracket.
A report from NerdWallet argues that, for most savers, at largely all income levels, utilizing a Roth individual retirement account (IRA) can generate significantly more retirement wealth compared with a traditional IRA.
2) Traditional IRA -- Traditional IRAs are designed to allow investors to save for their own retirement outside of employers' plans, and contributions are made on a pre-tax basis.
Roth IRA accounts are frequently recommended by advisers but sometimes in what seems a cookie-cutter fashion, assuming everyone should open a Roth account and that everyone with a traditional IRA should convert it to a Roth at any time.
Can I convert my traditional IRA funds into a Roth IRA?
There are similarities between a traditional IRA and a Roth IRA.
Converting a traditional IRA to a Roth IRA can offer powerful benefits, but it requires consideration of several factors.
The Roth conversion will be taxed at a lower rate than what heirs would pay if they decided to convert the account from a traditional IRA to a Roth later on.
But remember that if the $5,500 had gone directly into a traditional IRA, you would have reaped about $1,375 in tax savings each year at a 25 percent tax rate (more, with a higher tax rate).

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