Traditional IRA

Invest your money for the long term and pay taxes later

A traditional Individual Retirement Account (IRA) helps you build your retirement savings by:

  • Allowing tax-deductible contributions. You may be able to deduct your IRA contributions from your taxes in the year you contributed. This lowers your taxable income.1
  • Investing your money tax-deferred. Over time, your money stays invested in your account, without being taxed. When it’s time to withdraw your money in retirement, you’ll be taxed based on your income at the time of withdrawal.

Features of a traditional IRA

In addition to the immediate tax advantages,2 a traditional IRA lets you:

  • Contribute on your schedule. You’re in charge of your IRA, not a current or previous employer. You can contribute money whenever you like throughout the year, within the IRS annual limits (PDF). And there are no income-based restrictions on how much you contribute.
  • Customize your investments. IRAs typically offer a wider range of investment options than a 401(k). You can tailor these to your goals, savings timeframe, and risk tolerance.

Is a traditional IRA right for you?

In general, a traditional IRA might be the right choice if:

  • You’ll likely be in a lower tax bracket in retirement, since you’ll no longer be receiving a paycheck
  • You’ve changed jobs a few times (or think you’ll change jobs in the future) and want a single spot to consolidate your accounts and keep saving for retirement

Compare a traditional IRA and a Roth IRA

A Roth IRA is another type of IRA you can choose. Compare a traditional and Roth IRA side by side.

 Traditional IRARoth IRA
When do you pay taxes?In retirement, when you withdraw your savings.Up front, before you contribute. Your earnings then grow tax free.
Are there age limits?You can contribute up until the year you turn 70½.Can contribute at any age, as long as you have earned income.3
How much can you contribute?Up to $6,000; if you’re 50 or older, you can contribute an additional $1,000Up to $6,000; if you’re 50 or older, you can contribute an additional $1,000
Are there income limits?You must have earned income, but there’s no maximum limit4To contribute the full amount allowed by the IRS, your income must be below:
  • $122,0005 for a single tax filer
  • $193,0005 for a joint tax filer
Are there rules around withdrawing your money?
  • You can withdraw money penalty-free at age 59½, or earlier for certain hardship situations
  • You have to start withdrawing money by April 1 of the year after you turn 70½.
  • You can withdraw your contributions at any time, penalty free
  • You can withdraw earnings penalty-free at age 59½, or earlier for certain hardship situations6
  • You’re not required to withdraw your money at any age
When might it make sense to invest in this account?
  • You want to save outside of an employer plan account
  • You expect you’ll be in a lower tax bracket in retirement
  • You want to save outside of an employer plan account
  • You think tax rates may be higher when you retire
  • Your income doesn’t exceed the max limit

Learn more about an IRA with Principal

Find out how Principal® can help you stay on track to reach your retirement goals. Learn more about our IRA options.

Or, open your IRA with Principal today:

We have options to meet your specific investing style.

  • A Principal IRA keeps you in the driver’s seat. It gives you the control—with as much or as little assistance as you want to help you make informed investment decisions.
  • Principal® SimpleInvest IRA uses technology to create an investment mix personalized to you, that’s monitored and rebalanced on an ongoing basis.
  • Let us connect you with an advisor in your area to discuss a rollover IRA.

Want more information? Read an article on 3 steps for starting an IRA.

Start your IRA with Principal
Have an existing retirement account?

Moving your retirement savings into one account can make managing your investments easier.

Already have an IRA with Principal?

Log in to view account information online or add to your account.

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1 You’ll deduct your contributions on your tax returns; limits may apply.

2 Deductibility of contributions is dependent upon coverage by employer-sponsored retirement plan and your Adjusted Gross Income.

3 Subject to IRS income limitations.

4 There may be some limits on tax deductibility if your spouse has a retirement plan at work.

5 Based on 2019 tax year.

6 Your account must be open for 5 years and you must be over age 59 1/2 to be eligible for qualified tax-free withdrawals.

This document is intended to be educational in nature and is not intended to be taken as a recommendation. 

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Financial professionals are sales representatives for the members of Principal Financial Group®. They do not represent, offer, or compare products and services of other financial services organizations. 

Insurance products and plan administrative services provided through Principal Life Insurance Co. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC. Principal Life and Principal Securities are members of Principal Financial Group®, Des Moines, IA 50392.

Principal® SimpleInvest is a discretionary investment advisory program that offers diversified investment portfolios for a fee. Principal® SimpleInvest is sponsored and managed by Principal Advised Services, LLC, which consults with Principal Global Investors, LLC in the creation of the portfolios and the selection of the underlying portfolio investments. Trading and execution services provided by RobustWealth, Inc.  Principal Advised Services, LLC, Principal Global Investors, LLC, and RobustWealth, Inc. are members of the Principal Financial Group®. Brokerage and custodial services provided by Apex Clearing Corporation, member FINRA, NYSE and SIPC. Apex Clearing Corporation is not affiliated with any member of the Principal Financial Group®. Principal® SimpleInvest portfolios are comprised primarily of Principal® products, including affiliated mutual funds and ETFs. 

Please refer to the Form ADV (PDF) for Principal Advised Services, LLC and other applicable disclosures and agreements for important information about Principal® SimpleInvest and its services, fees and related conflicts of interest. All investments have inherent risks. Investing in Principal® SimpleInvest portfolios does not guarantee profit or protect against loss.

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