how traditional iras work
traditional iras let individuals contribute pre tax dollars to a retirement investment account which can grow tax deferred until retirement withdrawals occur at age 59 or later custodians including commercial banks and retail brokers hold traditional iras and place the invested funds into different investment vehicles according to the account holder s instruction and based on the offerings available 4contributions to traditional iras are tax deductible in most cases for instance if someone contributes 6 000 to their ira they can claim that amount as a deduction on their income tax return and the internal revenue service irs will not apply income tax to those earnings but when that individual withdraws money from the account during retirement earnings are taxed at their ordinary income tax rate 5the irs restricts contributions to a traditional ira each year depending on the account holder s age the contribution limit for the 2023 tax year is 6 500 for savers under 50 years of age and 7 000 in 2024 for people aged 50 and above higher annual contribution limits apply via a catch up contribution provision allowing for an additional 1 000 this means it s a total of 7 500 in 2023 and 8 000 in 2024 67under the secure act of 2019 age restrictions on contributions to a traditional ira were lifted as long as the account holder has earned income to qualify they are eligible to contribute to a traditional ira regardless of age 8traditional iras and 401 k s or other employer plans