Prepare for the future with an IRA.
This is the IRA you are used to hearing about. This classic IRA features:
- You may get a tax deduction of up to $6,000 in 2021, plus an extra $1,000 catch-up contribution if you are 50 or older. The tax deduction eligibility depends on your income and other factors.
- Earnings on a Traditional IRA are not taxed until withdrawn.
- Withdrawals of principal and interest are taxed when withdrawn, but the delayed taxation usually means a lower tax rate when made after retirement.
- Early withdrawals come with a steep penalty. Besides your regular income tax rate, the IRS assesses a 10% early penalty for withdrawals made before age 591/2.
A Traditional IRA is generally preferred for those who anticipate being in a lower tax bracket after retirement due to reduced income. If your place of employment doesn't offer a retirement plan, a Traditional IRA may be for you, too.