A traditional IRA is an individual retirement account that you can contribute money to before or after taxes, giving you immediate tax benefits if your contributions are tax-deductible. A traditional IRA is a type of individual retirement account that allows your earnings to increase with deferred taxes. The main differentiator between a traditional IRA and a Roth IRA boils down to how they are taxed. Unlike a traditional IRA, contributions to a Roth IRA are not tax-deductible and qualified distributions are tax-free.
Unlike the well-known Roth IRA, which offers after-tax contributions for tax-free income during retirement, a traditional IRA offers an opportunity to save money for retirement without having to pay initial taxes. When you have a traditional IRA and an employer-sponsored retirement plan, the IRS can limit the amount of your traditional IRA contributions that you can deduct from your taxes. After that, use the money from your retirement savings to a Roth or traditional IRA to take advantage of the wider range of investments.
