No, a traditional IRA does not grow tax-free. Contributions into a traditional IRA receive favorable tax treatment and is often deducted from an employee's taxable income. When it is time to withdraw earnings, any growth on the investment is taxable. In the meantime, earnings are tax-deferred. This is opposite treatment of Roth IRAs where initial investments can not be deducted from income, but its growth can be withdrawn tax-free at retirement.