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The Traditional IRA allows you to invest with pre-tax contributions that can compound over time in a tax-deferred environment. Plus, owners may qualify for tax-deductions in addition to yearly contributions.
Anyone who is under the age of 70½ and has compensation* is eligible to make a contribution to a Traditional IRA.
The owner can begin withdrawing from the account at age 59½ (withdrawals before this are subject to penalty and taxes) and is required to take a distribution each year beginning in January after attaining the age of 70½ (you also cannot make any contributions after this age). For more information see IRA Withdrawal Rules.
Grow your retirement account over time tax-deferred, while also possibly qualifying for yearly tax-deductions. While the money is taxed when withdrawn, often owners are in a lower tax bracket at that point in their life.
You can set up and make contributions to a Traditional IRA if you meet BOTH of these requirements:
If both you and your spouse have compensation and are under age 70½, each of you can set up an IRA. You cannot both participate in the same IRA.
*Compensation is defined as the wages, salaries, commissions, bonus, alimony and any other amount that you receive for providing personal services. For individuals who are self-employed, sole proprietors and partners in a partnership, “earned income” is another term for compensation. Passive income such as interest, dividends and most rental income are not considered compensation for the purpose of funding an IRA.