Traditional or deductible IRA

One advantage of the traditional or deductible IRA is that it allows for contributions to be taken as tax deductions in the tax year they were made. These deductions are able to significantly reduce your tax burden.

Traditional IRAs have a tax break that applies to your income during the year of your contribution. For example, if you have earned $50,000 and make a 10% contribution to an IRA (which amounts to $5,500), your tax for that year will only be applied to the remainder of your income, amounting to $44,500.

In essence, a Traditional IRA allows for the postponement of taxes. When retirement comes, you can start paying these deferred taxes – this is highly convenient especially when you foresee that your taxes during retirement will be much lower.

A Traditional IRA is ideal for lowering taxes during one’s employment years, which is the time highly crucial for saving up for retirement. Instead of allowing much of your income to go simply to taxes during employment, why not allow it to be set aside for your retirement and grow as your investment earnings?

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