In the last issue, we discussed the MAGI limits for Traditional IRA deductibility and some of the rules. This week, we will take a deeper dive into our multi-part series on the differences between the Traditional IRA and the Roth IRA and how to understand them.
Traditional IRA: A Deeper Dive
Tax-Deferred Growth
Your investments inside a Traditional IRA grow without being taxed each year. You only pay taxes when you take distributions. The SECURE Act 2.0 made many revisions to the tax code, and some distributions qualify for penalty-free withdrawals.
Required Minimum Distributions
Once you reach age 73, the IRS requires you to begin taking minimum distributions from your Traditional IRA each year. These withdrawals are taxed as ordinary income and the amounts are based on IRS life expectancy tables. Failure to take RMDs results in a substantial penalty.
Who Might Benefit Most
A Traditional IRA may be worth exploring for those who:
- Expect to be in a lower tax bracket in retirement than they are today
- Want to reduce their current taxable income
- Are not eligible to contribute to a Roth IRA due to income limits
- Prefer to defer tax obligations to the future
Whew! That’s enough for the Traditional IRA. Next issue, we will begin looking at the Roth IRA, the benefits, and differences.
(This article is intended for general educational purposes only and reflects tax rules for the 2026 tax year. Tax laws are subject to change. This content does not constitute personalized investment, tax, or legal advice. Individual results will vary. Please consult a qualified financial advisor, tax professional, or attorney before making retirement planning decisions.
I had a great time meeting a lot of you at the Stoners Pizza Joint in Pooler $1.00 Slice Night! It was packed inside and outside, and don’t forget to sign up and be a Live Like Locals Insider for a chance to win a free family pizza or a $100 gas gift card!
Thought for the Week:
“Be strong enough to stand alone, smart enough to know when you need help, and brave enough to ask for it.”
Frederick Hogsett, Jr., is a licensed financial coach with almost 30 years of experience helping individuals, families, small businesses, and nonprofit organizations. He recently opened an office in Savannah, Georgia, and can be reached at (803) 463-2773 or by website at www.livemore.net/fhogsettjrclient.