A retirement account that allows an individual to allocate pretax income toward investments that can grow tax-deferred. Income contributed to the account is limited, and may be deductible from taxable income based on the taxpayers amount of income and filing status. Capital gains taxes or dividend income taxes are only assessed once funds are withdrawn from the account.
The contribution limit to a traditional IRA, as determined by the IRS for the 2017 2018 tax years, is $5,500 for individuals under the age of 50, and $6,500 for individuals over the age of 50. Once you reach 70 ½, you are no longer eligible to contribute to a traditional IRA. If an individual is participating in a 401(k) or other pension plan, the IRS may put further restrictions on the amount you can contribute.