Traditional IRAs Tutorial

There is no question that the world of retirement and retirement plans is a confusing one. With so many options from which to choose, how does an individual know which one is best for him or her? This tutorial looks at the traditional individual retirement account – otherwise known as the traditional IRA. We will go through how it works, how one can be established and how distributions are taxed.

Why Establish a Traditional IRA?

A traditional IRA is an excellent way to build retirement income. Making contributions is discretionary, allowing individuals to choose when they want to fund their traditional IRAs.

Contributions to a traditional IRA may be tax deductible, and the earnings grow on a tax-deferred basis. This means that assets in the traditional IRA are not taxed until they are withdrawn, allowing the owner to defer paying taxes until retirement, when he or she might be in a lower tax bracket. In addition, these accounts are open to anyone with eligible income. There are no income limits on being able to make contributions, though the deductibility of contributions may be subject to limitations.

Read on to learn the rules that govern traditional IRAs.