Ken and I went to see Chicago the musical last week.
Our youngest daughter, Jordyn, said it sounded really cool —
“like something retired people would do.”
We laughed and reminded her that we are very much not retired.
But once we got to our seats and looked around, we realized we might have been the youngest people there.
Some things make you feel older not because of your age….
Retirement planning is one of those things.
And a Traditional IRA is one of the simplest — and most misunderstood — ways people do exactly that.
What a Traditional IRA Actually Is
A Traditional IRA (Individual Retirement Account) is a personal retirement savings account you open on your own — not through an employer.
You contribute money.
That money can be invested.
And it grows tax-deferred over time.
“Tax-deferred” means you don’t pay tax on the growth each year. Taxes are generally paid later, when you take distributions in retirement.
It’s not flashy.
It’s not complicated.
But it can be powerful.
Yes, There’s Still Time to Contribute for 2025
This is one of the most commonly missed opportunities we see each tax season.
Even though the calendar year has ended, you generally have until the tax filing deadline (April 15, 2026) to make a Traditional IRA contribution for 2025.
That means you can:
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Look at how 2025 actually turned out
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See your income and tax picture clearly
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Then decide whether an IRA contribution makes sense
It’s one of the few tax planning tools that still gives you flexibility after the year is over.
How Much Can You Contribute?
For 2025, contribution limits are:
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$7,000 if you’re under age 50
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$8,000 if you’re age 50 or older (includes catch-up contributions)
You must have earned income (wages or self-employment income) to contribute, but you don’t need an employer retirement plan.
How Traditional IRAs Affect Your Tax Bill
Here’s where this becomes more than just “retirement planning.”
Depending on your income and whether you or your spouse are covered by a workplace retirement plan, your Traditional IRA contribution may be deductible.
A deductible contribution:
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Reduces your taxable income
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Can lower the tax you owe for 2025
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Or increase your refund
This is what we mean when we talk about “quiet” tax moves. There’s no loophole or trick — just a decision that affects the bottom line in a very real way.
How a Traditional IRA Works Over Time
A Traditional IRA isn’t about this year alone.
It’s about:
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Time
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Consistency
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Compounding
Money inside the account grows tax-deferred. Over years (or decades), that growth can be significant. Taxes are paid later, when income may be lower and cash flow looks different.
That’s why people often start IRAs long before retirement feels close — even if their kids think it sounds like something “older people” do.
How to Open and Fund a Traditional IRA
Opening a Traditional IRA is usually straightforward:
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Choose a financial institution (brokerage, bank, or investment platform)
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Open a Traditional IRA account
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Designate the contribution year (this step matters)
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Fund the account (lump sum or smaller contributions)
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Invest the money based on your timeline and comfort level
One common mistake we see:
People open the account but never actually invest the funds. An IRA is just the container — the investment choices inside it are what drive growth.
What This Looks Like in Real Life
For many of our clients — especially small business owners and professionals juggling multiple priorities — IRA decisions aren’t about “maxing everything out.”
They’re about:
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Reducing taxes responsibly
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Creating options down the road
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Making intentional decisions with the information they have
That kind of planning tends to show up in quieter ways — like choosing to think ahead, even when you’re not anywhere near retirement.
Frequently Asked Questions About Traditional IRAs
Can I still contribute to a Traditional IRA for 2025?
Yes. In most cases, you have until the tax filing deadline (generally April 15, 2026) to make a Traditional IRA contribution for the 2025 tax year. When you contribute, you’ll need to clearly designate the contribution as being for 2025.
Do I need to be close to retirement to open a Traditional IRA?
Not at all. Many people open Traditional IRAs years before retirement. Often, the motivation is reducing current taxes and building long-term flexibility — not because retirement is right around the corner.
Are Traditional IRA contributions always tax-deductible?
No. Deductibility depends on factors like:
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Your income level
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Your filing status
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Whether you or your spouse are covered by a workplace retirement plan
Some contributions are fully deductible, some partially deductible, and some not deductible at all. This is why context matters.
What happens if my contribution isn’t deductible?
Even if a contribution isn’t deductible, a Traditional IRA can still offer tax-deferred growth. Non-deductible contributions do require additional tracking, so it’s important to understand how they’re reported before contributing.
How much can I contribute to a Traditional IRA for 2025?
For 2025:
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$7,000 if you’re under age 50
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$8,000 if you’re age 50 or older
You must have earned income to contribute.
Can I open and fund a Traditional IRA myself?
Yes. Traditional IRAs are opened individually through a bank, brokerage, or investment platform. One common oversight is opening the account but not actually investing the funds — the IRA itself is just the container.
How does a Traditional IRA affect my tax return?
If your contribution is deductible, it can:
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Reduce taxable income
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Lower the tax owed
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Or increase a refund
The actual impact depends on your broader tax picture, not just the contribution alone.
Is a Traditional IRA better than a Roth IRA?
Neither option is universally better. They are taxed differently, and the right choice depends on income, timing, and long-term goals. Many people benefit from understanding both before deciding.
The Bottom Line
A Traditional IRA isn’t exciting in the way headlines are exciting.
But it’s steady.
It’s flexible.
And if used thoughtfully, it can reduce taxes now while building something meaningful for later.
It’s about being intentional.
If you’re wondering whether a Traditional IRA contribution makes sense for your 2025 tax picture, that’s a conversation worth having before April.
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