Potential for tax-deferred growth
(if under age 50)
(if age 50 or older)
Why open a Traditional IRA?
A Traditional IRA may give you a potential tax break because pre-tax contributions lower annual taxable income.
Compare investment accounts to see if a Traditional IRA account is right for you.
Contributions can be made on a pre-tax basis and may be tax-deductible depending on income
Tax-deferred growth potential
All investment earnings are tax-deferred; pay taxes only when distributions are taken
No annual IRA fees and no account minimums
Transaction fees, fund expenses, brokerage commissions, and service fees may apply
Benefit of flexibility
Withdraw assets penalty-free at any time for a qualified first time home purchase, qualified higher education costs, or certain major medical expenses4
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What are the eligibility requirements for Traditional IRA?
- Must be 18 years of age or older with earned income
- Cannot contribute after age 70½
- Must have MAGI (Modified Adjusted Gross Income) under certain thresholds to deduct contributions
- To apply online, you must be a US citizen or resident
- Traditional IRAs must be established by the tax filing deadline (without extensions) for the tax year to which your qualifying contribution(s) will apply. This date is generally April 15 of each year. Applications postmarked by this date will be accepted.
- Participation in an employer-sponsored retirement plan, such as a 401(k), 403(b), or 457 plan, may impact an investor’s ability to deduct Traditional IRA contributions on their taxes. If neither an investor nor their spouse participates in an employer-sponsored plan, they can fully deduct a Traditional IRA contribution on their taxes.
- If an investor does participate in an employer-sponsored retirement plan, and if their MAGI is less than $64,000 in 2019 ($65,000 in 2020), they also may be eligible to deduct their entire contribution. If an investor’s MAGI is between $64,000-$74,000 in 2019 ($65,000-$75,000 in 2020), they may be eligible to deduct a partial contribution. Investors with MAGI of more than $74,000 in 2019 ($75,000 in 2020) are not eligible to deduct a contribution.
- If an investor participates in an employer-sponsored retirement plan, and if their combined MAGI is less than $103,000 in 2019 ($104,000 in 2020), they also may be eligible to deduct their entire contribution. If their combined MAGI is between $103,000-$123,000 in 2019 ($104,000-$124,000 in 2020), they may be eligible to deduct a partial contribution. An investor is not eligible to deduct a contribution if their combined MAGI is more than $123,000 in 2019 ($124,000 in 2020).
- If an investor does not participate in an employer-sponsored plan, but their spouse does, then the income limits are different. If their combined MAGI is less than $193,000 in 2019 ($196,000 in 2020), they may be eligible to deduct their entire contribution. If their combined MAGI is between $193,000-$203,000 in 2019 ($196,000-$206,000 in 2020), they may be eligible to deduct a partial contribution. An investor is not eligible to deduct a contribution if their combined MAGI is more than $203,000 in 2019 ($206,000 in 2020), and their spouse participates in an employer-sponsored plan.
How can an investor contribute to an IRA?
An investor can contribute to an IRA account by transferring funds online from a bank or brokerage account, sending a check, or completing a wire transfer. For more information about ways to make a deposit to an account, see the Help topic, Contribute to an IRA account.
An investor is allowed to contribute 100% of earned income up to the annual contribution limit. View IRA Contribution Limits and Deadlines to learn more.
What is a Roth IRA conversion and how can it be requested?
A Roth IRA conversion is the process of moving assets from a Traditional, Rollover, SEP, or SIMPLE IRA to a Roth IRA. The account owner can convert all or a portion of their IRA. If the account owner is converting a SIMPLE IRA, the account must have been opened for at least two years to be eligible. The deadline to complete a Roth IRA conversion is December 31 of each year. Please note: The recharacterization of Roth Conversions is no longer permitted due to the Tax Cut and Jobs Act. Read more if you are thinking about a Roth IRA conversion. For questions specific to your situation, please speak to your tax advisor. A Roth IRA conversion can be requested by using the online Roth IRA Conversion Request Form.
How can one determine whether a Traditional IRA contribution is tax-deductible?
Determining if an investor can deduct all or part of their Traditional IRA contribution is based on whether they have a retirement plan at work, their tax filing status, and modified adjusted gross income (MAGI). To determine the exact amount of a deductible contribution, use the IRA Selector or view IRA Contribution Limits and Deadlines to learn more.
Can an investor have an IRA even if they contribute to their employer’s 401(k) plan?
This is a common myth about retirement investing. An investor may still contribute to an IRA even if they participate in an employer-sponsored retirement plan. However, they may not be able to deduct a Traditional IRA contribution if they exceed certain income limits. View IRA Contribution Limits and Deadlines to learn more.
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