Definition
A retirement account where contributions may be tax-deductible and taxes are paid upon withdrawal during retirement.
What to consider
- Review the tax benefits and restrictions before contributing.
- Plan your withdrawals carefully to avoid penalties.
- Keep track of annual contribution limits.
Real world scenarios
- Fearing a higher tax bracket next year, Celia contributes to a Traditional IRA to reduce her current taxable income.
- Wyatt prefers the immediate tax break of a Traditional IRA, planning to handle taxes on distributions upon retirement.
- Tolu occasionally reviews IRA contribution limits, ensuring he makes the most of each tax year’s allowance.
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