Contribution Limits (2025)

Annual limit: $7,000 for those under age 50; $8,000 with the catch-up contribution at 50+ The limit is shared across all traditional and Roth IRAs — you cannot max out both You have until the tax filing deadline (typically April 15) to contribute for the prior year Contributions require earned income — investment and rental income do not qualify

Deduction Rules Based on Workplace Plan Coverage

If you participate in an employer plan, your deduction may be limited by income 2025 single filers with a plan: full deduction under $79,000 MAGI, phaseout to $89,000 If only your spouse has a plan: full deduction under $236,000 MAGI, phaseout to $246,000 If neither spouse has a workplace plan, the full deduction is available at any income level

Non-Deductible Contributions and the Pro-Rata Rule

Contributions above the deduction limits are non-deductible but still grow tax-deferred Non-deductible contributions must be reported on IRS Form 8606 to track your basis The pro-rata rule treats all traditional IRA balances as one pool for Roth conversions Rolling pre-tax IRA funds into a 401(k) before converting can reduce the pro-rata issue

Withdrawal Rules and Early Penalties

Withdrawals before age 59 1/2 generally trigger a 10% penalty plus income tax Exceptions include disability, first-time home purchase ($10K cap), and medical expenses Substantially equal periodic payments (72(t)/SEPP) allow penalty-free access before 59 1/2 After 59 1/2, withdrawals are taxed as ordinary income but no penalty applies

Traditional vs Roth IRA Comparison

Traditional IRAs offer a potential upfront deduction — Roth IRAs offer tax-free withdrawals Traditional IRAs require RMDs starting at 73 — Roth IRAs have no RMDs for the owner If your tax rate will be lower in retirement, traditional may produce a better outcome Future tax rates are uncertain, so holding both account types provides flexibility

Traditional IRA Deduction Rules

Q: Required Minimum Distributions (RMDs)

Traditional IRA owners must begin taking RMDs starting at age 73 (under SECURE 2.0) RMD amounts are calculated using IRS life expectancy tables and your account balance Failing to take an RMD triggers a 25% excise tax on the amount not withdrawn RMDs are taxed as ordinary income and cannot be rolled into another tax-deferred account

Curated by: Rubric Advisors

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Traditional IRA Basics

A traditional IRA is a tax-advantaged retirement account that may offer an upfront deduction
Contributions grow tax-deferred — you pay income tax only when you withdraw funds
Anyone with earned income can contribute, but the deduction depends on income and plan coverage
Traditional IRAs are available through most brokerages with a wide range of investment options

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Traditional IRA Basics

Contribution Limits (2025)

Deduction Rules Based on Workplace Plan Coverage

Non-Deductible Contributions and the Pro-Rata Rule

Withdrawal Rules and Early Penalties

Required Minimum Distributions (RMDs)

Traditional vs Roth IRA Comparison

Related Topics

401(k) Withdrawal Rules

Cash Balance Plans: High-Income Retirement Strategy

Required Minimum Distributions (RMDs)

Traditional IRA Basics

Contribution Limits (2025)

Deduction Rules Based on Workplace Plan Coverage

Non-Deductible Contributions and the Pro-Rata Rule

Withdrawal Rules and Early Penalties

Required Minimum Distributions (RMDs)

Traditional vs Roth IRA Comparison

Related Topics

401(k) Withdrawal Rules

Cash Balance Plans: High-Income Retirement Strategy

Required Minimum Distributions (RMDs)