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When Is a Traditional IRA the Right Choice for Retirement Savings?

A Traditional IRA may be a strong fit if you want the possibility of lowering your taxable income today. Depending on your income level and whether you or your spouse are covered by a workplace retirement plan, your contributions may be tax-deductible. A deductible contribution can reduce your taxable income for the year, which is a key reason many people choose a Traditional IRA.

Once funds are inside the Traditional IRA, your savings grow tax-deferred. This means you will not owe taxes on investment earnings until you withdraw the money in retirement. When you do begin taking withdrawals, they are generally taxed as ordinary income. If you withdraw funds before age 59 and one-half, an additional IRS early withdrawal penalty may apply unless you qualify for an exception.

A Traditional IRA may be especially attractive if you expect to be in the same or a lower income tax bracket when you retire. It can also provide useful flexibility in how you structure retirement income over time. With WealthRabbit, you can easily open and manage a Traditional IRA alongside other retirement savings, including SIMPLE IRA contributions you may receive through your employer.