Traditional IRAs offer eligible savers tax deductions of up to $5,500 a year ($6,500 for those 50 and older). But the bigger benefit is the way they allow you to invest for the future.

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What is a traditional IRA?

A traditional IRA is an individual retirement account that offers tax advantages to savers. (It’s called a “traditional” IRA to distinguish it from a Roth IRA — more on those below.) If you contribute to a traditional IRA, you not only get to build a much-needed pot of money for retirement, you also get tax perks from the IRS for doing so.

In 2018, the IRA contribution limit is $5,500, or $6,500 if you’re 50 or older. Here are other key details on the traditional IRA:

  • Traditional IRA contributions are deductible in the year they are made
  • The IRS gets its share when you take retirement distributions, which are taxed as ordinary income
  • In the meantime, you get the benefit of tax-deferred investment growth

If you believe your tax rate will go down in retirement — which is often the case for those further along in their careers or at a salary peak — you can save with a traditional IRA by putting off paying taxes until you qualify for the lower rate.

The other kind of tax treatment comes in the form of a Roth IRA, the traditional IRA’s cousin. These accounts reverse the tax benefit of a traditional IRA: There’s no tax deduction when you make contributions, but distributions in retirement are not taxed. That turns tax-deferred growth into tax-free growth, and it’s likely a better choice if you expect your tax rate to go up in retirement rather than down.

» MORE: Read our Roth vs. traditional IRA comparison.

What are the benefits of a traditional IRA?

These accounts have far more benefits than drawbacks. Still, it’s important to note the strengths and weaknesses when comparing traditional IRAs to other savings vehicles:

Are you eligible for a traditional IRA?

The good news: Everyone is eligible for a traditional IRA. The bad news: You may not be able to deduct your contributions if you or your spouse is covered by an employer retirement plan, like a 401(k), and your income passes a certain threshold.

The IRS doesn’t want you to squeeze too much out of the system, so as income climbs, the amount of your traditional IRA contribution that you can deduct is reduced, then eliminated altogether. To be clear, you can still make contributions, but they won’t be tax-deductible.

If you fall into the phase-out range, contribute as much as you’re eligible to deduct. If your income revokes your invitation to the deduction party completely, reevaluate your options.

Nondeductible IRA contributions can still be valuable: Money saved for retirement is money saved for retirement, and this money will still generate investment growth tax-deferred. But this can also be a headache: You are responsible for keeping track of after-tax contributions by filing IRS Form 8606 each year, so you’re not taxed again on that money when you take retirement distributions.

In short, there are better options you should max out before going down the nondeductible IRA road. They are:

  1. A Roth IRA, if you’re eligible. These accounts have income eligibility rules, but they are higher than the limits to deduct traditional IRA contributions. (Here’s more on Roth income limits.)
  2. Your employer retirement plan. You should max that out before making nondeductible IRA contributions.

If, after exhausting both of those options, you still want to consider nondeductible IRA contributions, consult an accountant before proceeding.

Where can you open a traditional IRA?

Many financial services companies offer traditional IRAs, including online brokers, robo-advisors and banks.

When choosing a provider, look for low or no account fees; a large selection of low-cost, no-transaction-fee mutual funds and commission-free exchange-traded funds; and quality customer service. You can open the account online, so be ready with general information — Social Security number, birthday, contact information and employer details.

If you are interested in selecting your own investments for your IRA, an online broker is likely a good home for your account. With a broker, you’ll select from investments accessible through that provider, including stocks, bonds and mutual funds. (Remember, a traditional IRA isn’t an investment itself, but an account that holds investments.)

Here are some of NerdWallet’s top broker picks for IRAs:

If choosing your own investments sounds too daunting, consider a robo-advisor. These providers, which now include many of the most recognizable names in investing, use automated technology to choose investments based on your goals and investing horizon, all for a fraction of what a traditional investment manager might charge.

Here are NerdWallet’s top picks for IRA robo-advisors:

Want to review even more IRA providers? See our full round-up of the the best IRA providers.