1. Tax Deductions: Contributions are often tax-deductible, reducing your taxable income for the year in which you make contributions.

2. Tax-Deferred Growth: Investments in a traditional IRA grow tax-deferred, meaning you don't pay taxes on earnings until you withdraw the money.

3. Lower Income Taxes in Retirement: If your income is lower in retirement, you may be in a lower tax bracket when you withdraw funds, potentially reducing your overall tax burden.

4. Flexibility in Investments: You can typically choose from a wide range of investment options, including stocks, bonds, mutual funds, and more.

5. Spousal IRA Contributions: If you file jointly and only one spouse has earned income, you can still contribute to an IRA for the non-working spouse.

Traditional IRA (Individual Retirement Account)


1. Required Minimum Distributions (RMDs): Starting at age 73, you must begin taking RMDs, which are taxable withdrawals mandated by the IRS. Failure to take RMDs can result in significant penalties.

2. Taxation of Withdrawals: When you withdraw money from a traditional IRA, it is taxed as ordinary income. This could result in a higher tax burden in retirement if you're in a similar or higher tax bracket.

3. Early Withdrawal Penalties: Withdrawals before age 59 ½ are generally subject to a 10% early withdrawal penalty, in addition to regular income taxes, unless an exception applies.

4. Limits on Contributions: There are annual contribution limits, and your ability to deduct contributions may be limited based on your income and whether you or your spouse are covered by a retirement plan at work.

Required Minimum Distributions (RMDs)

RMDs are mandatory withdrawals from traditional IRAs and certain other retirement accounts starting at age 73. The amount you must withdraw is determined by your age and the total value of your IRAs. Failure to take RMDs can result in substantial penalties. RMDs are designed to ensure that retirees withdraw a minimum amount each year and pay taxes on that amount.