How Do I Know If My IRA is Traditional?

Traditional IRAs can be opened at any financial institution that provides them, such as brokerage firms, banks and credit unions. Each typically offers various investments including mutual funds, stocks and bonds to choose from.

Contributions to traditional IRAs are tax deductible, while investment growth occurs tax deferred. When withdrawing money from this account, any earnings will be subject to income taxes.


Traditional IRAs allow savers to deduct contributions made towards them from federal taxes, thus lowering taxable income and potentially qualifying them for incentives such as child credits or student loan interest deductions. Each year, however, the IRS sets an annual maximum contribution deduction amount based on each taxpayer’s income and filing status.

Traditional IRA investment earnings are tax-exempt until their withdrawal by a saver, at which point they’re typically treated as ordinary income and taxed as such. Traditional IRAs require annual required minimum distributions beginning at age 73.

An Individual Retirement Account, or IRA, is a tax-advantaged retirement investment vehicle that allows investors to diversify their portfolio with stocks, bonds, mutual funds and real estate investments. Collectibles such as art and coins cannot be held within an IRA account. Some IRA providers also provide self-directed brokerage accounts or online brokers/robo-advisors. There are various IRA options available so it’s essential that you select one that meets both your financial goals and investing timeline.


Income earned within an IRA grows tax-deferred until withdrawals are taken out and taxed as ordinary income. Contribution deductions depend on both your income and whether either of you is covered by an employer-sponsored retirement plan such as 401(k).

Traditional IRAs are ideal for investors who wish to invest but lack the confidence in themselves to manage the investments themselves. Many online brokerage firms and robo-advisory services provide these accounts, and some even manage entire portfolios on behalf of clients.

Traditional IRAs are also incredibly popular among self-employed workers and small business owners, who may also take advantage of other tax-deductible savings options like employer sponsored retirement plans to contribute. SEP-IRAs and SIMPLE IRAs do not impose an income cap for eligibility; however they have lower deduction limits than Roth IRAs which could make these accounts less appealing as tax savings vehicles.

Required minimum distributions

On Jan 1, 2023 (or later if they reach age 73 before then) those owning traditional individual retirement accounts and tax-deferred savings plans such as 401(k)s must begin withdrawing an annual withdrawal minimum required under RMDs; this requirement aims to prevent people from indefinitely deferring taxes on pretax investment growth held within these accounts.

To determine your RMD, the IRS calculation tables provide guidance. Take into account any changes since calculating FMV such as changing from traditional IRA to Roth account or undoing Roth-to-traditional conversion.

Inherited IRAs also come with special rules. Depending on when and who are beneficiaries, RMDs could be skipped altogether or use the Joint Life Expectancy Table instead of RMDs; your Wells Fargo retirement professional can assist in understanding these regulations. Alternatively, an inherited IRA can be converted to either a traditional or Roth IRA to avoid the 10% early withdrawal penalty penalty.


Traditional IRAs can be found at many financial institutions, such as banks, insurance companies, mutual funds and brokerage firms. Traditional IRAs have become one of the most popular tools in your retirement-savings arsenal due to their diverse investment choices; however, there may be restrictions as to when distributions can occur and on what types of investments can be made within an IRA.

Traditional IRA contributions are made using pre-tax dollars and any investment growth is tax deferred until withdrawal at retirement. You may use your traditional IRA money for qualified expenses without incurring an early withdrawal penalty, though any distribution will require taxes to be paid on that distribution.

Financial planners usually recommend choosing a traditional IRA if your anticipated tax bracket at retirement will be lower than today, while for those expecting their taxes to increase during retirement a Roth IRA might be the more suitable solution.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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