Even if you have a workplace retirement savings plan, you could augment your savings with a traditional IRA. You may be able to score a federal tax deduction too if you meet certain conditions, such as earning less than or equal to a specific amount for a given tax year. Learn how a traditional IRA works, who can open and contribute to one, and the difference between a traditional IRA and a Roth IRA.
What is a traditional IRA?
A traditional IRA is a type of individual retirement account designed to help you save and invest for retirement independent of an employer-sponsored retirement savings plan, like a 401(k) or 403(b). Full-time employees, contractors, self-employed individuals, freelancers, and even those working only part-time or seasonally could all open and contribute to a traditional IRA, provided they have earned income. And those contributions could potentially be tax-deductible (depending on your income and if you have access to a workplace retirement savings plan), possibly lowering your taxable income and keeping more dollars in your pocket today.
How does a traditional IRA work?
With a traditional IRA, you contribute money that’s already been taxed, up to the annual limit that applies across all IRAs you may own. Then you could invest the money in the account.
If your income is within the deduction limits—and you and your spouse aren't covered by a retirement plan at work—you can deduct all or some of your traditional IRA contributions from your federal taxes. You will have to pay income taxes on those dollars when you withdraw from your account later on. Even if you don’t qualify for the income tax deduction in the year you contribute, you can still benefit from the potential for tax-deferred investment growth if you wait until age 59½ to withdraw. You may have a lower tax rate in retirement than while you’re still working, so you could pay less in taxes later.
If you make nondeductible contributions to your IRA, you’ll still have to track them and note them on Form 8606 when you file your tax return.
Who can contribute to a traditional IRA?
Anyone, regardless of age, who has earned income can contribute to their own traditional IRA. Non-working spouses who file jointly with their spouses with earned income can also contribute to their own traditional IRA.
Who can open a traditional IRA?
Technically, anyone age 18 or over can open a traditional IRA, and some institutions may require a minimum amount of money to open an account. Fidelity has no minimum to open an account.1 Remember that to contribute to an IRA, though, you must have earned income.
Traditional IRA contribution limits
Each year, the IRS sets a limit for how much you can contribute to your IRAs.
The annual contribution limit for traditional IRAs is $7,500 for 2026. If you're age 50 or older, you can contribute an additional $1,100 for 2026.
This contribution limit applies to money deposited across all your IRAs, including Roth IRAs. So if you have both types of accounts, you can only contribute up to $7,500 total to the accounts, not $7,500 to each account. However, you cannot contribute more than your earned income over the calendar year. That means if you earned less than $7,500 in 2026, your contribution limit equals your earned income amount. You can contribute to your IRA until the unextended federal tax deadline for that tax year (usually April 15 of the following calendar year).
Are traditional IRA contributions tax-deductible?
Traditional IRA contributions can be tax-deductible under certain conditions. The IRS has different modified adjusted gross income (MAGI) limits to qualify for deductions or credits. The income threshold depends on your filing status and whether your or your spouse’s employer offers a workplace plan. If you aren’t covered by a workplace plan and neither is your spouse, there is no income limit in order to take advantage of a full federal tax deduction for traditional IRA contributions.
Find out what the traditional IRA income and deduction limits are for 2026.
Traditional IRA withdrawal rules
You can withdraw your money from your IRA penalty-free starting at age 59½. Federal taxes are paid on deductible contributions and earnings. The nondeductible contributions are not taxed even if withdrawn before age 59½. However, an individual cannot pull the nondeductible contributions first: They are taken pro-rata with earnings. Earnings are taxed and would be subject to a 10% penalty.
You can take money out of your IRA before age 59½, but in many cases you’d have to pay a 10% tax penalty on top of federal income taxes. That penalty and federal taxes are applicable only on the deductible and earnings portions of the withdrawal. The non-deductible portion of the withdrawal is exempt. There are some exceptions that allow you to withdraw money and avoid that tax penalty, including the following:
- A first-time home purchase (up to $10,000)
- A birth or adoption expense (up to $5,000)
- A qualified education expense
- Disability
- For health insurance (if you are unemployed)
- Some medical expenses
You generally must begin taking required minimum distributions (RMDs) during the year you turn 73. You have a one-time option to delay your first RMD until April 1 of the following year, but doing so means you'll need to take a second RMD by the end of that same calendar year.
Traditional IRA benefits
Here are 4 reasons why millions of Americans might have chosen to save for retirement with a traditional IRA:
- Possible tax advantages: Contributing to a traditional IRA could not only help you build retirement savings but also help reduce your tax bill, if you qualify. Contributions and earnings are tax-deferred until withdrawn at retirement.3
- Qualified early withdrawals: Although these funds are earmarked for retirement, you can still make penalty-free early withdrawals for some of life’s big expenses, like a first-time home purchase or for qualified higher education expenses.4
- Investment options: Traditional IRAs give you access to a broad range of investment options, such as mutual funds, stocks, bonds, ETFs, and more.
- Easy to qualify: Anyone with earned income can contribute to a traditional IRA.
Traditional IRA disadvantages
Before opening a traditional IRA, it’s important to consider the account’s possible drawbacks compared to other retirement accounts:
- Low contribution limits: IRAs allow less than one-third the contribution amount that workplace retirement savings plans, like 401(k)s, 403(b)s, and 457(b)s, permit. Fortunately, you could have an IRA and a workplace account at the same time—you could even have multiple IRAs and workplace accounts at the same time, provided your combined IRA contributions and your workplace-plan contributions don't exceed the applicable limits for each category of account.
- Income limits for tax-deductible contributions: Depending on your income and whether your employer or your spouse’s offers a workplace retirement plan, you may not be able to reduce your taxable income by deducting all, or a portion, of your traditional IRA contributions.
- Required minimum distributions (RMDs): Traditional IRAs mandate you take distributions starting at age 73. Roth IRAs don’t have RMDs. While workplace plans do have them, most plan participants can delay RMDs until the year they retire. That exemption doesn't apply if you own more than 5% of the company sponsoring the plan.
Traditional IRA vs. Roth IRA
Before opening a traditional IRA, it’s a smart idea to examine whether a Roth IRA may make more sense for your financial situation and retirement savings strategy. Unlike with a traditional IRA, you can’t deduct contributions to a Roth IRA from your taxes. Qualified withdrawals of earnings from a Roth IRA after age 59½ aren't subject to federal income taxes, and contributions can be withdrawn at any time, regardless of age.5 There are income limits to be eligible to contribute to a Roth IRA, though.
Learn more about which IRA is right for you.
How to open a traditional IRA
Ready to start saving for retirement with a traditional IRA? Here are the steps to open and invest in one.
1. Decide where to open your traditional IRA. Choosing a financial institution to be custodian of your IRA is an important decision. Consider looking for a place that doesn’t charge fees or commissions or require minimums to open an account. It also could be helpful to pick a reputable institution—or where you already have accounts.
2. Submit the requested information. The financial institution is likely to ask for personal details like your Social Security number, home address, employer info, investment profile, and, if you’ll be investing online (website or mobile app), bank information so you can transfer money between accounts. They’ll verify your identity, possibly through a third party, so you may need to supply identification and other documents. The process could take just a few minutes online.
3. Fund the account. The next step is to actually transfer cash in. Just keep in mind the annual contribution limit across personal IRA accounts because exceeding that could lead to tax penalties. You could contribute yearly, monthly, or with every paycheck. You could even automate your contributions to help you stay on track with retirement savings year-round.
4. Select and buy investments. Once you’ve funded your traditional IRA, it’s time to invest. When picking investments, consider the historical performance and account for your time horizon and risk tolerance.
5. Record IRA transactions for tax purposes. Your financial institution should do this automatically on IRS Form 5498, which they send to you as an FYI and file with the IRS on your behalf. But it can’t hurt to track your contributions, particularly nondeductible contributions, and trades on your own, in the rare case there’s a discrepancy.
6. Monitor your investments. Just because you’ve made your trades doesn’t mean your work is over. It’s important to check in on your investments at least annually, if not more frequently, to make sure your portfolio matches your investing game plan.