A Traditional IRA offers tax-deferred growth potential, with investors being able to deduct all or part of their contributions from pretax income if certain conditions are met, making it an effective way to reduce current tax obligations.
Why a Traditional IRA Could Make Sense for You
- All or part of your contributions may be tax-deductible, which may reduce your taxable income.
- Your deductible contributions are taxed only when you make withdrawals, at a time when many investors are in a lower tax bracket.
- There are no income restrictions when it comes to contributing to a Traditional IRA.
| Traditional IRAs at a Glance | |
| Tax Advantages |
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| Eligibility |
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| Age | You must be under age 70½ and have earned income. |
| Maximum Income | No restrictions. |
| Minimum Income | You must have earned income equal to or greater than your contributions. |
| Maximum Contributions | 2009—$5,000 ($6,000 if you are age 50 or older) Use Automax to automatically contribute the maximum amount every year. |
| Minimum Contributions | $1,000, or $50 per month with our Automatic Asset Builder Service. |
| Withdrawals | |
| Taxable | All withdrawals from a Traditional IRA (except for amounts attributable to nondeductible contributions) are generally taxed as ordinary income. |
| Required Minimum Distributions | You must begin taking required minimum distributions by April 1 of the year following the year in which you reach age 70½. |
| Exceptions |
The 10% penalty tax for withdrawals made before age 59½ is waived in the following cases:
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| T. Rowe Price Is Your Low-Cost Traditional IRA Solution | |
| No-Load Funds | T. Rowe Price offers no-load funds with no sales charges or commissions. In addition, most of our funds have lower expense ratios than their Lipper averages. |
| Save on IRA Fees | There are no annual fees for mutual fund accounts with balances of at least $5,000; individuals with balances of at least $50,000; or households with balances of at least $100,000 or more invested with T. Rowe Price. A $10 annual fee is charged for each IRA mutual fund account with a balance of less than $5,000 at the time the fee is assessed. |
Are My Traditional IRA Contributions Tax-Deductible?
You're eligible for a fully deductible IRA contribution if neither you nor your spouse participates in an employer-sponsored retirement plan. If either of you do participate in such a plan, your ability to deduct your full IRA contribution may be limited by your income. Check the chart below to see if any part of your Traditional IRA contribution will be deductible at your income level.
| Adjusted Gross Income, Investor Under Age 50 | ||||
| Single | Married/ Filing Jointly | Married/ Spouse in Qualified Plan | Married/ Filing Separately | Deductible |
| $55,000 | $89,000 | $166,000 | $0 | $5,000 |
| $56,000 | $91,000 | $167,000 | $1,000 | $4,500 |
| $57,000 | $93,000 | $168,000 | $2,000 | $4,000 |
| $58,000 | $95,000 | $169,000 | $3,000 | $3,500 |
| $59,000 | $97,000 | $170,000 | $4,000 | $3,000 |
| $60,000 | $99,000 | $171,000 | $5,000 | $2,500 |
| $61,000 | $101,000 | $172,000 | $6,000 | $2,000 |
| $62,000 | $103,000 | $173,000 | $7,000 | $1,500 |
| $63,000 | $105,000 | $174,000 | $8,000 | $1,000 |
| $64,000 | $107,000 | $175,000 | $9,000 | $500 |
| $65,000 | $109,000 | $176,000 | $10,000 | $0 |
| Adjusted Gross Income, Investor Age 50 or Over | ||||
| Single | Married/ Filing Jointly | Married/ Spouse in Qualified Plan | Married/ Filing Separately | Deductible |
| $55,000 | $89,000 | $166,000 | $0 | $6,000 |
| $56,000 | $91,000 | $167,000 | $1,000 | $5,400 |
| $57,000 | $93,000 | $168,000 | $2,000 | $4,800 |
| $58,000 | $95,000 | $169,000 | $3,000 | $4,200 |
| $59,000 | $97,000 | $170,000 | $4,000 | $3,600 |
| $60,000 | $99,000 | $171,000 | $5,000 | $3,000 |
| $61,000 | $101,000 | $172,000 | $6,000 | $2,400 |
| $62,000 | $103,000 | $173,000 | $7,000 | $1,800 |
| $63,000 | $105,000 | $174,000 | $8,000 | $1,200 |
| $64,000 | $107,000 | $175,000 | $9,000 | $600 |
| $65,000 | $109,000 | $176,000 | $10,000 | $0 |
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