A traditional IRA is an individual retirement arrangement (IRA), established in the United States by the Employee Retirement Income Security Act of 1974 (ERISA) (, codified in part at ). Normal IRAs also existed before ERISA. The IRA is held at a custodian institution such as a bank or brokerage, and may be invested in anything that the custodian allows (for instance, a bank may allow certificates of deposit, and a brokerage may allow stocks and mutual funds). Unlike the Roth IRA, the only criterion for being eligible to contribute to a Traditional IRA is sufficient income to make the contribution. However, the best provision of a Traditional IRA — the tax-deductibility of contributions — has strict eligibility requirements based on income, filing status, and availability of other retirement plans (mandated by the Internal Revenue Service). Transactions in the account, including interest, dividends, and capital gains, are not subject to tax while still in the account, but upon withdrawal from the account, withdrawals are subject to federal income tax (see below for details). This is in contrast to a Roth IRA, in which contributions are never tax-deductible, but qualified withdrawals are tax free. The traditional IRA also has more restrictions on withdrawals than a Roth IRA. With both types of IRA, transactions inside the account (including capital gains, dividends, and interest) incur no tax liability. According to IRS pension/retirement department as of July 13, 2009, Traditional IRAs (originally called Regular IRAs) were created in 1975 and made available for tax reporting that year as well. The original contribution amount in 1975 was limited to $1,500 or 15% of the wages/salaries/tips reported on line 8 of the Federal form 1040 (1975). Traditional IRA contributions are limited as follows: * Since 2009, contribution limits have been assessed for potential increases based on inflation, though the contribution limits for 2009 through 2012 remained unchanged.

About the author 

Nathan Tarrant

Nathan has worked in financial services, marketing, and strategic business growth for over 30 years, as well as working in internet marketing since 1998.

In 2008 after the financial crash, Nathan operated as a financial & investment advisor to delegates of the United Nations, the World Health Organization, and senior managers of Fortune 500 companies in Geneva, Switzerland.

He started Gold Trends as he enjoys working with alternative investments, having advised on them in the past.

Please note: Nathan is no longer a financial or investment advisor. The information he shares on this site is purely for education and information purposes only. You can read more on the About page.

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