Traditional IRAs

Traditional IRA is the term used to describe the original concept for an Individual Retirement Account.  Traditional IRAs differ from Roth IRAs and SIMPLE IRA plans.  Contributions to Traditional IRAs may be tax deductible, or nondeductible.  Earnings are allowed to accrue to these IRA accounts free from income taxes until withdrawn.

You can set up a Traditional IRA as long as you have taxable compensation, or have not reached age 70 1/2 by the end of the calendar year.  The contribution limits for a Traditional IRA are $5,000 in 2011, or $6,000 with the catch-up contribution that applies to individuals age 50 or older.

Contributions to Traditional IRAs are capped at your taxable compensation.  Tax deductible contributions are also phased out as income increases.  Our article on Traditional IRA has up-to-date information on contributions as well as deduction phase out thresholds.