Traditional IRAs

Fundamentals of Market Investing by Adam J. McKee

In most cases, contributions to traditional IRAs are tax-deductible.  If you contribute $5,500 to your IRA, you can claim that amount as a deduction on your income tax return, and Uncle Sam does not apply income tax to those earnings.  However, when you withdraw funds from the account during retirement, your withdrawals are taxed as income.  As of 2018, annual individual contributions to traditional IRAs cannot exceed more than $5,500 ($6,500 if you are 50 or older).  It is for this reason that the other types of IRAs were developed for small business owners and employees of small companies.  As these maximums seem to indicate, the traditional IRA is intended to be a supplement to your retirement savings, not the entirety of it.  There are some limits that the government sets about what you can buy in an IRA, and there are many more options available in an IRA held within a brokerage than just about any other type of retirement account.


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