PROSCONS
  • There are no income limits to open and contribute to a traditional IRA
  • If you're eligible for the tax deduction on contributions, you can claim it whether or not you itemize deductions on your tax return
  • Tax-deferred growth means any gains you would pay taxes on in a standard brokerage account are pushed down the road
  • You can use traditional IRA money to pay for qualified college expenses without paying an early distribution penalty, although you'll pay taxes on the distribution
  • You can use up to $10,000 from a traditional IRA toward the purchase of your first home (again, you’ll owe taxes on the distribution but no penalty)
  • If you tap the money before age 59½, you’ll pay taxes and a 10% early distribution penalty, unless your withdrawal qualifies as an exception. (Here’s a full list of the traditional IRA early distribution rules.)
  • You must begin taking distributions — called required minimum distributions — at age 70½. (There are no required minimum distributions with Roth IRAs.) Also at 70½, you can no longer make contributions to the account.
  • If you're covered by a retirement plan at work, your ability to deduct IRA contributions may be reduced or eliminated at higher incomes.