A traditional IRA allows your investment to grow tax-deferred, meaning you pay no taxes on earnings until they're withdrawn. Typically, you can't withdraw from a traditional IRA without paying income tax plus a 10% federal penalty tax until you reach age 59½. You must begin withdrawing money by the year after you turn 70½.
Anyone with earned income can contribute to a traditional IRA. For some people, contributions to a traditional IRA are tax-deductible, meaning a contribution will reduce their income tax bill. For instance, someone who doesn't participate in a qualified employer retirement plan can deduct his or her entire contribution to a traditional IRA.
In addition, most married couples filing a joint return—even those in which one spouse has little or no compensation—can make IRA contributions. The maximum they can contribute is two times the annual per-person limit. However, neither spouse can exceed the individual contribution limit for a particular year for his or her IRA.
