How to Contribute to a Traditional IRA

It's fun to spend money, no doubt, but it makes sense to sock away some dough for the future. An Individual Retirement Account (IRA) is an ideal way to save for retirement. Rules for IRAs have evolved, you can now even access their proceeds, without penalty, to fund higher education and first-time home buyer expenses before you retire. A traditional IRA account provides you with an immediate tax benefit as well. If you have compensation from a job, you're all set to contribute to a traditional IRA.

Contact a bank, brokerage, mutual fund company or other financial institution that offers IRAs. Tell the representative that you want to open a traditional IRA. You can also conduct the entire process of opening an account online with many firms. You'll need to provide basic personal information as well as other details such as your Social Security number and the names of those you want to be account beneficiaries when you open your account. Initial investment amounts and funding options vary from firm to firm.

Set up an automatic transfer between your bank account and your traditional IRA account. You can do this as part of the initial application process or after the fact in most cases. Typically, this process involves providing your bank's routing number and your checking or savings account number to provide a link between the two accounts. Alternatively, send in a check, wire funds or transfer assets from another firm to fund your account.

Arrange a schedule of contributions to your traditional IRA. Options are to invest a lump sum or invest periodically. Most financial institutions allow for automatic investments on a set schedule, often monthly or quarterly. As IRS Publication 590 explains, you are allowed to contribute a total of $5,000 a year ($6,000 if you are 50 years of age or older) to your IRAs each year, as of 2010.


  • Generally, when you file your income taxes you can deduct the total amount of your traditional IRA contributions from your taxable income, thereby reducing your federal tax due. Your IRA custodian -- the entity you opened your account with or transferred it to -- will send IRS Form 5498 to you at the end of the year, detailing your IRA contributions for the tax year. The IRS also receives a copy of your 5498.
  • Consult IRS Publication 590 or your tax or financial adviser to ensure you are eligible to deduct your traditional IRA contributions. Depending upon factors such as your filing status, income and participation in a workplace retirement plan, you may not be eligible for a deduction, or the IRS might adjust the amount you can deduct each year.
  • You can own a traditional and Roth IRA simultaneously. In fact, you can own multiple traditional and Roth IRAs. However, the combined contributions to all your IRAs cannot exceed the IRA limit for a given tax year and your age.

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About the Author

As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.