How A Traditional IRA Helps Protect Your Retirement Income

03.16.2026 | Category: Financial Planning

Reviewed by: Adam Olson, CFP®, LUTCF, FSCP, RICP
Wealth and Retirement Strategist

Summary: A Traditional IRA isn’t just a retirement account; it’s a tool that can help protect your income as you move from working years into retirement. Understanding how it works and how it fits into your overall retirement strategy can help you protect your financial security as life evolves.

Key takeaways:

A Traditional IRA is an individual retirement savings account
Contributions may be tax deductible, depending on eligibility
Investments grow tax deferred
Taxes are generally paid when money is withdrawn
A Traditional IRA can support retirement income and tax planning

What is a Traditional IRA?

A Traditional IRA is an individual retirement account that helps you save for retirement by allowing your money to grow with tax-deferred investment earnings. Depending on your income and whether you or your spouse participates in a workplace retirement plan, your contributions may be tax deductible, and taxes are generally paid when money is withdrawn later in retirement.

Because of this combination of flexibility and potential tax benefits, it has become one of the most widely used retirement accounts. A Mutual of Omaha survey found that 44% of adults age 40+ report owning a Traditional IRA.*

For many households, a Traditional IRA offers a way to build savings outside of an employer-sponsored plan while creating flexibility around when taxes are paid. Over time, those savings can become an important source of income, helping protect your financial stability as work slows down, priorities shift and retirement begins to take shape.

How does a Traditional IRA work?

A Traditional IRA works by separating contributions, growth, and taxes over time.

You contribute money while working: Contributions may be tax deductible, depending on income and whether you or your spouse have a workplace retirement plan.
Your money grows tax deferred: Investments inside the account grow without being taxed year to year.
You pay taxes when you withdraw funds: Withdrawals are generally taxed as ordinary income in retirement.

This tax timing appeals to many savers. 26% of adults say they prefer to defer paying taxes until retirement, highlighting why Traditional IRAs remain attractive. * That tax-deferred growth can help strengthen your long-term income foundation, providing another layer of financial protection as your earnings change or eventually stop.

Who can contribute to a Traditional IRA?

Unlike Roth IRAs, most people with earned income can contribute to a Traditional IRA regardless of income level. There are no age limits for contributions as long as you have eligible income.

Basic requirements include:

Earned income during the year
Contributions made by the tax filing deadline
Staying within annual contribution limits

While income does not limit your ability to contribute, it does affect whether your contributions are tax deductible.

For 2026 IRA deduction limits, if you or your spouse participate in a workplace retirement plan, the deduction begins to phase out for single filers with modified adjusted gross income (MAGI) above $81,000 and for married couples filing jointly above $129,000, with the deduction fully eliminated at higher income levels.

Traditional IRA contribution limits

Traditional IRA contribution limits apply to the combined total you can contribute each year across all IRA accounts.

For 2026, the annual contribution limit for Traditional IRAs is $7,500 for individuals under age 50, and $8,600 for individuals age 50 or older, including a catch-up contribution.

As Mutual of Omaha Advisors’ Director of Strategy & Communications and host of the Make it Personal Podcast, Mark Zagurski notes, “you generally have until the April tax filing deadline, not just December 31st, to make a contribution for the previous tax year.”

Understanding that timing can create additional planning flexibility.

Traditional IRA withdrawal rules

Traditional IRA withdrawal rules determine when you can take money out and how it’s taxed.

Withdrawals are generally taxable.

Most distributions are taxed as ordinary income in the year you take them.

Early withdrawals may trigger penalties.

If you withdraw funds before age 59½, you may owe a 10% early withdrawal penalty in addition to regular income taxes, unless an IRS exception applies under current rules.

Non-deductible contributions are treated differently.

If you made non-deductible contributions, that portion of your withdrawal is not taxed again, though earnings are still taxable.

Because withdrawals increase taxable income, timing matters. Coordinating IRA withdrawals with other income sources — such as Social Security benefits, pension payments, part-time work income, or required minimum distributions from other retirement accounts — can help manage overall tax exposure and support more consistent income as your needs evolve.

Required minimum distributions (RMDs)

Traditional IRAs are subject to required minimum distributions (RMDs). The IRS generally requires account owners to begin taking RMDs by the year they reach age 73, and annually thereafter.

RMDs are treated as ordinary income, which makes planning withdrawals carefully an important part of managing taxes in retirement.

Benefits of a Traditional IRA

A Traditional IRA can offer several advantages:

Potential tax deduction during working years
Tax-deferred growth over time
Flexibility in investment choices
Ability to supplement employer retirement plans
Support for managing taxable income in retirement

For many households, it helps balance current tax relief with future income needs.

Potential disadvantages to consider

A Traditional IRA isn’t right for everyone. Some considerations include:

Withdrawals are generally taxable
Required minimum distributions apply later in retirement
Early withdrawals may trigger taxes and penalties
Deductibility may be limited at higher incomes

These factors make it important to consider how a Traditional IRA fits with other retirement income sources. Zagurski notes, “you want diversity in where your assets are located so that you aren’t stuck with a retirement income source that is 100% taxable.”

That balance is often part of broader retirement planning.

How a Traditional IRA works in retirement

In retirement, a Traditional IRA often shifts from a savings tool to an income source. It may be used to:

Supplement Social Security income
Provide steady withdrawals over time
Help manage year-to-year taxable income

At this stage, coordinating IRA withdrawals with other income sources, including 401(k) distributions and Social Security, can help improve predictability and control.

As Zagurski explains, “A balanced retirement strategy often involves splitting retirement account contributions between traditional and Roth accounts to create maximum flexibility for future income.”

Flexibility creates options — and options provide protection as life evolves.

Considering your options

Choosing between retirement accounts isn’t just about tax rules. It’s about how those rules fit your life. Research shows that household income (49%) and age or time until retirement (55%) are the top factors people consider when selecting retirement accounts.*

Understanding how a Traditional IRA compares to other options can help you build a strategy that balances today’s tax benefits with tomorrow’s income needs. In many cases, Traditional IRAs can also be combined with other retirement accounts — such as a 401(k) or Roth IRA — to create greater flexibility and help manage tax exposure over time. Building a mix of account types can give you more control over how and when income is taxed, helping you adjust as your circumstances, health needs, or family priorities change.

What is the difference between a Roth IRA and a Traditional IRA?

The primary difference is when taxes are paid. A Traditional IRA may provide a tax benefit while you’re working, with taxes generally paid later when money is withdrawn in retirement. A Roth IRA takes the opposite approach, requiring taxes to be paid upfront while allowing qualified withdrawals to be taken tax free later.

Is a 401(k) the same as a Traditional IRA?

No, they are not the same. A Traditional IRA is opened individually and offers flexibility in investment choices. A 401(k) is employer-sponsored and typically offers a curated menu of investment options selected by the plan sponsor. Many people use both as part of a broader retirement plan.

Retirement planning isn’t static. Income needs, tax rules and personal goals can shift over time, which is why flexibility matters. As Mutual of Omaha Financial Advisor and Certified Financial Planner (CFP®) Adam Olson puts it, “Personal finance is more personal than it is finance; it’s about marrying the numbers to your individual needs and how you want your money to add value to your life.”

Ultimately, the right mix of retirement accounts depends on your income, timeline and goals — and how you want to protect your income as life changes. A thoughtful strategy can help you adapt to new phases of life while keeping your long-term financial security in focus.

Want help deciding if a Traditional IRA is right for you?

A Traditional IRA is just one piece of your overall retirement planning strategy. Understanding how it fits alongside other savings, income sources, and long-term goals can help you protect what matters most.

Frequently asked questions about traditional IRAs

Is a traditional IRA pre-tax?

A Traditional IRA is considered pre-tax only if contributions are deductible. If contributions are not deductible, they are made with after-tax dollars, but earnings still grow tax deferred.

Does a traditional IRA reduce taxable income?

It can. Deductible contributions may reduce taxable income for the year. Eligibility depends on income and workplace retirement plan coverage.

Can I have both a Traditional IRA and a Roth IRA?

Yes. You can own both a Traditional IRA and a Roth IRA at the same time. However, your combined contributions across all IRA accounts must stay within the IRS annual contribution limits.

Is a SIMPLE IRA the same as a Traditional IRA?

No. A SIMPLE IRA is a workplace retirement plan offered by some small employers and includes employer contributions. A Traditional IRA is opened individually and does not involve employer matching.

How do you transfer a Traditional IRA to a Roth IRA?

Transferring a Traditional IRA to a Roth IRA is known as a Roth conversion. The amount converted is generally taxed as ordinary income in the year of the conversion, since Roth IRAs are funded with after-tax dollars. Conversions can be useful in some situations but require careful tax planning.

How do you open a traditional IRA?

You can open a Traditional IRA through a financial institution, such as a bank, brokerage, or financial advisor, by completing an application, selecting investments, and making contributions throughout the year.

Reviewed by: Adam Olson, CFP®, LUTCF, FSCP, RICP

Wealth and Retirement Strategist

Adam is a Certified Financial Planner, author and podcast host with a deep passion for helping clients navigate all aspects of personal finance, from financial planning and investment management to life and health insurance. His goal is to empower individuals and families with the knowledge and tools they need to make confident financial decisions. He resides in Norfolk, Nebraska with his wife, Katie, where they are raising their four boys.

Source:
Based on Mutual of Omaha proprietary survey of U.S. adults age 40+ with household income of $50,000+, conducted February 6–9, 2026.

Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc. Mutual of Omaha Advisors is a division of Mutual of Omaha Insurance Company.

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.

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