Traditional IRA
A Traditional IRA is a tax-advantaged retirement account designed to help individuals save for the future. Individuals with earned income may contribute to a Traditional IRA, subject to IRS annual contribution limits and eligibility requirements. Depending on income, tax filing status, and participation in an employer-sponsored retirement plan, contributions may be fully deductible, partially deductible, or non-deductible.
Contribution Limits:
| Tax year | Under Age 50 | Age 50+ |
|---|---|---|
| 2026 | $7,500 | $8,600 |
Refer to the following chart to determine if your IRA contributions will be deductible based on your adjusted gross income level and filing status:
AGI Tax Deductibility:
| Single* | Married Filing Jointly* | Deduction* |
|---|---|---|
| AGI less than $81,000 | AGI less than $129,000 | Full |
| AGI $81,000 to $91,000 | AGI $129,000 to $149,000 | Limited |
| AGI more than $91,000 | AGI more than $149,000 | None |
*For taxpayers covered by an employer-sponsored retirement plan at work.
Deductibility of Traditional IRA contributions depends on several factors, including income, filing status, and whether you or your spouse participate in a workplace retirement plan. Because IRS limits and deductions on rules may change periodically, consult current IRS guidance or a qualified tax professional regarding your eligibility.
Withdrawals
After reaching age 59½, withdrawals may be taken without IRS early withdrawal penalties. Distributions from a Traditional IRA are generally taxable as ordinary income. Under current law, most Traditional IRA owners must begin taking required minimum distributions (RMDs) at age 73. Those born in 1960 or later, the RMD age is currently set at age 75.
Early Withdrawals
Funds may be withdrawn from a Traditional IRA at any time; however, taxes and penalties may apply. Withdrawals taken before age 59½ may be subject to a 10% IRS early withdrawal penalty unless an exception applies. Common exceptions may include:
- Payments made to a beneficiary following the account owner’s death
- Distributions due to qualifying disability
- Certain substantially equal periodic payment programs
- Qualified unreimbursed medical expenses
- Health insurance premiums for certain unemployed individuals
- Qualified first-time home purchase expenses
- Qualified higher education expenses
Beneficiary Benefits
Upon the death of the account owner, IRA assets may be distributed to named beneficiaries according to IRS rules in effect at that time. Surviving spouses may have additional options, including the ability to treat the inherited IRA as their own.
Rollovers and Transfers
Retirement assets may generally be moved between eligible retirement accounts through rollovers or direct transfers. A rollover involves receiving the funds and redepositing them into another eligible retirement account. Only one rollover is allowed in any 12-month period. Rollovers must be deposited to an IRA account within 60 days for the account to maintain its tax-deferred status. Transfers move funds directly between financial institutions and are not subject to rollover timing requirements.
For additional information regarding Traditional IRAs, consult IRS Publications 590-A and 590-B or visit the IRS website. Because tax laws frequently change and every individual’s financial situation is unique, SNPJ recommends consulting a qualified tax professional, financial advisor, or attorney before making retirement planning decisions.
DISCLAIMER:
This information is provided for educational purposes only and is not intended as tax, legal, or financial advice. Because individual circumstances vary, consult your tax advisor, attorney, or financial professional regarding your specific situation.
