Traditional IRA
A pre-tax retirement account — contributions reduce current taxable income, withdrawals are taxed in retirement.
2026 contribution limit is $7,000 ($8,000 if 50+). If you (or a spouse) are covered by a workplace plan, the deductibility phases out at higher incomes. Funds grow tax-deferred and are taxed as ordinary income on withdrawal — Required Minimum Distributions (RMDs) begin at age 73. The Traditional IRA wins over Roth when you expect a lower tax bracket in retirement, or when you want to lower today's tax bill. Pairs well with a Roth for tax diversification — having both gives you a knob to turn in retirement to manage your bracket year-by-year.
Related
- Roth IRA — An after-tax retirement account where withdrawals in retirement are tax-free.
- 401(k) — An employer-sponsored retirement account funded with pre-tax payroll deductions.
- Marginal tax rate — The tax rate on the next dollar you earn.