Traditional IRAs

A Traditional IRA is a tax-deferred individual retirement account, or an individual retirement annuity, from which eligible investors may be able to obtain a tax deduction on their contributions. You are eligible for the deduction if:

  • Neither you nor your employer are contributing to an employer-sponsored retirement plan on your behalf. If you're not covered by an employer's retirement plan, you can deduct the full amount of your contribution from your federal taxes, regardless of the amount of your income.
  • You're covered by an employer-sponsored retirement plan but meet the necessary income requirements. In this case, you're eligible either for a full deduction or a partial deduction.

Contribution Limits/Rules

The Traditional IRA contribution limit from your earned income for the 2011 and 2012 tax years is a maximum of $5,000 for each year (or up to $6,000 if you're age 50 or older).

You must be under age 70½ to be eligible to contribute to a Traditional IRA.

Please call us at 800 842-2252 to learn more about your eligibility for a tax deduction.


Withdrawal Rules

Withdrawals from a Traditional IRA after age 59½ are taxed at your ordinary income tax rate. However, if you withdraw money from a Traditional IRA before age 59½, you may pay a 10% early withdrawal penalty, as well as ordinary income tax.

The IRS may waive this penalty when distributions are used for:

  • Certain unreimbursed medical expenses
  • Medical insurance, providing certain conditions are met
  • A disability, if certain conditions are met
  • Payments to designated beneficiaries in the event of the death of the IRA owner
  • Payments that are part of a series of substantially equal periodic payments made, at least annually, for the life or life expectancy of the individual (or the joint lives or joint life expectancy of the individual and his/her designated beneficiary)
  • Qualified higher education expenses
  • The purchase of a first home
  • Qualified hurricane distributions
  • Qualified reservist distributions

Traditional IRA owners must begin taking minimum distributions no later than April 1 following the year they turn age 70½, or else they face a 50% IRS penalty tax on the amount they should have withdrawn.

Neither TIAA-CREF nor its affiliates offer tax advice. Consult your own tax advisor regarding your personal situation.

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