By Denise Appleby

There is no question that the world of retirement and retirement plans is a confusing one. With so many options to choose from, how does an individual know which one is best for his or her situation? This tutorial looks at the Traditional Individual Retirement Account - otherwise known as the Traditional IRA. We will go through how it works, how to set one up and even how distributions are taxed. Why Establish a Traditional IRA?
A Traditional IRA is an excellent supplement to an individual's retirement income. Making contributions is discretionary, so individuals can choose when they want to fund their Traditional IRA.

Contributions to a Traditional IRA may be tax deductible, and the earnings grow on a tax-deferred basis. This means that assets in the Traditional IRA are not taxed until they are withdrawn, allowing the owner to defer paying taxes until retirement, when he or she may be in a lower tax bracket, depending on his or her income and the tax rate that applies. Contributions are subject to statutory limits.

Next: Traditional IRAs: Eligibility Requirements »


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