Which type of retirement account typically offers tax deductions on contributions?

The Traditional IRA allows individuals to make contributions that may be fully or partially tax-deductible, depending on the person's income, filing status, and whether they are covered by a workplace retirement plan. This tax deduction applies in the year the contribution is made, which can reduce taxable income and, consequently, the amount of taxes owed for that year.

When money is contributed to a Traditional IRA, it grows tax-deferred until it is withdrawn, typically during retirement. At that point, withdrawals are taxed as regular income. This contrasts with a Roth IRA, where contributions are made with after-tax dollars and grow tax-free, providing no immediate tax deduction. A 529 Plan is designed for education savings and does not offer tax deductions on contributions in the same way. A Health Savings Account, while providing tax benefits for medical expenses, does not serve the same purpose as a retirement savings account.