traditional IRA

Individual retirement account that provides a tax-advantaged opportunity to save money each year for your retirement. Contributions of up to a set limit are fully deductible if you have employment income, as long as you are not covered by an employer-sponsored retirement plan, or you are covered by an employer-sponsored plan but your adjusted gross income is below certain levels. The tax deduction is phased out at higher income levels. Virtually all negotiable, marketable securities may be held in an IRA. In general, you are not allowed to contribute physical assets such as land, homes and collectibles to an IRA. Traditional IRA owners pay ordinary income taxes on the investment returns when they are distributed, and withdrawals are subject to the required minimum distribution (RMD) rules in retirement.