A Traditional IRA holds money tax-deferred until retirement. An Individual Retirement Account (IRA) is an account which allows tax-deferred growth of assets. As its name implies, an IRA has to be opened in the name of the individual.
A person can contribute to one, up to the annual limit, and deduct the entire amount from his or her taxes unless they are prevented from taking deductions due to participation in a workplace retirement plan and having income that exceeds certain limits.
Check with the IRS website or a financial professional to find out if you can take deductions. Even if you can’t, it is possible to have a non-deductible IRA, which will still grow tax-deferred.
You can open an IRA at almost any major bank or brokerage. The institution at which you hold your IRA is called the custodian or trustee of your account. Various investments are allowable inside of an IRA, and which ones you can use will depend on where your IRA is held, and what choices are made available to you.
Many people roll their retirement assets out of 401(k)s and into IRAs for the increased control and choice it gives them, and there is no tax implication to doing this. These are not to be confused with Roth IRAs.