What Is a Traditional IRA and How Does It Work?

Traditional IRAs as Retirement Plans in 2025

By Kailey Hagen – Updated Nov 17, 2025 at 2:31 PM

Key Points

Traditional IRAs allow tax-deferred investments and withdrawals after age 59 1/2.
Eligibility for IRA deductions depends on income, filing status, and existing retirement plans.
Transferring a traditional IRA to similar accounts doesn't trigger taxes; Roth conversions do.

Loading paragraph...

A person working in a café and holding a credit card while processing a customer's payment at a laptop. — Image source: Getty Images.

Loading image...

Loading paragraph...

*Adjusted Gross Income
2025 Modified AGI	2025 Maximum Tax Deduction	2026 Modified AGI	2026 Maximum Tax Deduction
$79,000 or less	$7,000, or $8,000 for those 50 and up	$81,000 or less	$7,500, or $8,600 for those 50 and up
Between $79,000 and $89,000	A reduced amount	Between $81,000 and $91,000	A reduced amount
More than $89,000	None	More than $91,000	None

Loading table...

For joint filers covered by a retirement plan at work:

Loading paragraph...

2025 Modified AGI	2025 Maximum Tax Deduction	2026 Modified AGI	2026 Maximum Tax Deduction
$126,000 or less	$7,000, or $8,000 for those 50 and up	$129,000 or less	$7,500, or $8,600 for those 50 and up
Between $126,000 and $146,000	A reduced amount	Between $129,000 and $149,000	A reduced amount
More than $146,000	None	More than $149,000	None

Loading table...

For single filers NOT covered by a retirement plan at work:

Loading paragraph...

2025 Modified AGI	2025 Maximum Tax Deduction	2026 Modified AGI	2026 Maximum Tax Deduction
Any	$7,000, or $8,000 for ages 50 and up	Any	$7,500, or $8,600 for ages 50 and up

Loading table...

For joint filers NOT covered by a retirement plan at work, and spouse IS NOT:

Loading paragraph...

2025 Modified AGI	2025 Maximum Tax Deduction	2026 Modified AGI	2026 Maximum Tax Deduction
Any	$7,000, or $8,000 for those 50 and up	Any	$7,500, or $8,600 for those 50 and up

Loading table...

For joint filers NOT covered by a retirement plan at work, but spouse IS:

Loading paragraph...

2025 Modified AGI	2025 Maximum Tax Deduction	2026 Modified AGI	2026 Maximum Tax Deduction
$236,000 or less	$7,000, or $8,000 for those 50 and up	$242,000 or less	$7,500, or $8,600 for those 50 and up
Between $236,000 and $246,000	A reduced amount	Between $242,000 and $252,000	A reduced amount
More than $246,000	None	More than $252,000	None

Loading table...

Loading paragraph...

Loading pitch...

Loading paragraph...

Pros of a traditional IRA	Cons of a traditional IRA
· Potential tax deduction now · No age limit for contribution · Tax-deferred growth · Extra retirement savings vehicle (regardless of retirement plan coverage through employer) · Could create tax diversification if you already have significant Roth assets · Wide array of investment options · Can easily be rolled over to accounts with similar tax treatment	· Potential higher tax rate in retirement · Limited tax benefits, even if you are eligible for the full deduction · Limits backdoor Roth IRA potential · RMDs increase taxable income in retirement · Not the most efficient to receive as a beneficiary due to embedded tax liability · Recent elimination of stretch IRA (account must be liquidated by beneficiary within 10 years) · Complicated rules

Pros of a traditional IRA

Cons of a traditional IRA

· Potential tax deduction now · No age limit for contribution · Tax-deferred growth · Extra retirement savings vehicle (regardless of retirement plan coverage through employer) · Could create tax diversification if you already have significant Roth assets · Wide array of investment options · Can easily be rolled over to accounts with similar tax treatment

· Potential higher tax rate in retirement · Limited tax benefits, even if you are eligible for the full deduction · Limits backdoor Roth IRA potential · RMDs increase taxable income in retirement · Not the most efficient to receive as a beneficiary due to embedded tax liability · Recent elimination of stretch IRA (account must be liquidated by beneficiary within 10 years) · Complicated rules

Loading table...

Loading paragraph...

Loading pitch...

Related Retirement Topics

Loading paragraph...

Retirement Planning: How to Map Out Your Financial Success

Learn how, why, and how much to save for your golden years.

Nonqualified Retirement Plans: Overview, Types, Pros & Cons

Targeted toward highly compensated employees, these retirement plans have special rules.

8 Strategies to Save for Retirement

You know you need to save for retirement. Here are some strategiess.

What Is a Roth IRA? How to Get Started

Want to get tax-free distributions in retirement? A Roth IRA may be right for you.

Loading hub_pages...

Loading paragraph...

Loading pitch...

Loading paragraph...

Loading faq...

About the Author

Kailey Hagen, CFP, is a contributing Motley Fool retirement analyst covering Social Security, Medicare, and retirement planning. Before The Motley Fool, Kailey was a research analyst for Reviews.com focusing on credit and banking products. She is a Certified Financial Planner® and holds a bachelor’s degree in English from the University of Wisconsin-Madison.

TMFKailey

The Motley Fool has a disclosure policy.