What is a Traditional IRA?

Traditional IRAs can be a smart solution to increase your tax-deferred retirement savings.

A Traditional IRA is an

A Traditional IRA is an Individual Retirement Account to which you can contribute pre-tax or after-tax dollars, giving you immediate tax benefits if your contributions are tax-deductible. With a Traditional IRA, your money can grow tax-deferred, but you’ll pay ordinary income tax on your withdrawals, and you must start taking distributions after age 72. Unlike with a Roth IRA, there are no income limitations to open a Traditional IRA. It may be a good option for those who expect to be in the same or lower tax bracket in the future.

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See if contributions are deductible

There is no income limit for a Traditional IRA, and depending on how much you make and whether you are in an employer retirement plan, your contributions may be tax-deductible. Current contribution limits:

  • $6,000 if you're under age 50.
  • $7,000 if you’re age 50 or older.

Determine your tax deductibility >

See Traditional IRA withdrawal rules

  • Age 59½ and under: Taxes and 10% penalty apply.
  • Age 59½ to 72: Taxes apply, but there is no 10% early withdrawal penalty.
  • Age 72 & over: Taxes apply. Required Minimum Distributions (RMD) are required.

Get Traditional IRA withdrawal details >

Common questions

Once you reach age 59½, you can withdraw funds from your Traditional IRA without restrictions or penalties. But keep in mind:

  • Your deductible contributions and earnings (including dividends, interest, and capital gains) will be subject to ordinary income taxes.
  • Once you reach age 72, you must start taking Required Minimum Distributions (RMDs) each year from your Traditional IRA. You cannot redeposit your RMD into an IRA.
  • You can take a premature distribution (known as a "60-day rollover") from your Traditional IRA once in a 12-month period without penalty—if you replace it within 60 days. If you don't pay back the distribution within 60 days, you'll have to pay ordinary income tax on the distribution, and you may be subject to an additional tax penalty.

If you're under age 59½, the U.S. government charges a 10% penalty—in addition to any ordinary income taxes due—on early withdrawals from a Traditional IRA, and a state tax penalty may also apply. However, you may be able to file a "penalty exception" for any of these reasons:

  • First-time home purchase
  • Educational expenses
  • Disability or death
  • Medical expenses
  • Expenses related to birth and adoption
  • Health insurance
  • Periodic payments
  • Involuntary distribution
  • Reservist distributions

Note that with all of these exemptions, specific requirements and restrictions apply. Please check with your tax advisor to see if you qualify.

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This tax information

This tax information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager. Depending on the type of account you have, there are different rules for withdrawals, penalties, and distributions.  Please understand these before opening your account.

Please read the Schwab Intelligent Portfolios PremiumTM disclosure brochures for important information about this program. Schwab Intelligent Portfolios PremiumTM is made available through Charles Schwab & Co., Inc. ("Schwab"), a dually registered investment advisor and broker-dealer.

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