Common Questions

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General

What is an IRA?

An IRA is an Individual Retirement Account that provides either a tax-deferred or tax-free way for you to save for retirement. There are many different types of IRAs but Roth, Traditional, and Rolllover IRAs are the most common. An IRA is simply an account. In an IRA some people invest in mutual funds or stocks, while others may choose bank products such as CDs and money market savings. Each IRA has certain eligibility requirements and each has unique features. Finding the right IRA for you will largely depend on which IRAs you are eligible for and which one offers the benefits that are most important to you.

Do IRAs only benefit those nearing retirement?

No. IRAs can provide benefits to anyone who is saving for retirement. In fact, the earlier you start, the more likely you are to benefit from an IRA due to compounding tax-deferred growth.

What is compounding tax-deferred growth?

All it really means is that when you earn interest, dividends or sell an investment (such as a mutual fund) for a gain, in an IRA, you don't need to pay taxes that year on the earnings. Instead, all taxes are deferred until you withdraw those earnings in your retirement.. This means you keep your money working for you and through the years that can really add up.

If I contribute to a 401(k), 403(b) or other employer-sponsored plan, can I also contribute to an IRA?

Yes. If you are currently investing in a 401(k) or other employer-sponsored plan, you are still eligible to open and contribute to an IRA.

Can anyone contribute to an IRA?

Traditional IRAs are available to anyone under the age of 70½ who has earned income at least as great as the amount they contribute to their IRA.

Roth IRA eligibility is based on your Modified Adjusted Gross Income (MAGI) and your tax-filing status (individual or joint) for the year of that contribution.

• For 2008 contributions, individual tax filers with modified adjusted gross income not exceeding $116,000, and joint tax filers with annual income not exceeding $169,000 are eligible to open and make a full contribution. See Roth Contribution Chart for more details.

For both Roth and Traditional IRAs, if you have no earned income but your spouse earns enough income to cover your contribution as well as their own, and their income (MAGI) meets the eligibility requirements above (Roth only), you are eligible to open and contribute to an IRA.

If you contribute to an employer-sponsored plan like a 401(k) or 403(b), you are still eligible to contribute to an IRA.

Is there a limit to how much I can contribute to an IRA?

Your contribution limit depends on your age and earned income. The maximum amounts allowed by law are:

	2007	2008
Under age 50	$4,000	$5,000
Age 50 and over	$5,000	$6,000

Your contribution limit is the maximum noted above or 100% of your earned income, whichever is less.

What is the deadline to make an annual contribution to an IRA?

You can make contributions to an IRA for a given tax year until the tax-filing deadline of the following year. The deadline for 2007 contributions is April 15, 2008. You can make IRA contributions for tax year 2008 from January 1, 2008 through April 15, 2009.

Is my contribution tax-deductible?

Roth IRA contributions are after-tax contributions and are not tax-deductible. Deductibility of Traditional IRA contributions depends on several factors, including your tax filing status and income:
Your contribution to a Traditional IRA is fully tax-deductible if any of the following apply:

• Neither you nor your spouse participates in an employer-sponsored retirement plan.
• You participate in an employer-sponsored retirement plan and your modified adjusted gross income is under $53,000 as a single taxpayer or $85,000 as married taxpayers filing jointly.
• You do not participate in an employer-sponsored retirement plan, but your spouse does, and your joint modified adjusted gross income is no more than $159,000. See Traditional Deductibility Chart for more details.

What are the ways I can invest in an IRA?

IRAs are like most other accounts when it comes to how you invest your money. They allow you to choose from investment products such as mutual funds, stocks, bonds, and ETFs, as well as bank products like CDs and money market savings.

When can I access the money in my IRA?

For a Roth IRA there is no tax or penalty for withdrawal of contributions at any age. There is also no penalty or federal tax on withdrawal of earnings after age 59½, provided the account has been held for five years and certain other requirements are met. If you withdraw your earnings before age 59½ or if the account has not been open for at least 5 years, there is a 10% penalty.

For a Traditional IRA, there is no penalty for withdrawals taken after age 59½. However, penalties do apply if you do not take the Required Minimum Distributions (RMDs) beginning at age 70½. If you take withdrawals before age 59½, you are subject to a 10% penalty.

For both Roth and Traditional IRAs, there will be no penalty for account withdrawals for the following reasons:

• Higher education expenses for you or certain family members
• Qualified first-time home purchase expenses up to $10,000
• Death or disability of the account owner
• Certain medical expenses and health insurance premium payments of unemployed individuals and un-reimbursed expenses exceeding 7.5% of adjusted gross income (AGI)
• Withdrawals made in equal installments over the account holder's life expectancy

Roth & Traditional IRAs

What is a Roth IRA?

A Roth IRA is a retirement savings account that provides federally tax-free growth and withdrawals once it has been open for 5 years and you are 59½ years of age. Contributions can be withdrawn at any time, tax and penalty-free. A Roth IRA allows you to choose from investment products such as mutual funds, stocks, bonds, and ETFs, as well as bank products like CDs and money market savings.

What is a Traditional IRA?

A Traditional IRA is a retirement savings account that provides federally tax-deferred growth. Withdrawals after the age of 59½ are taxed at your tax rate at that time. Contributions may be tax-deductible. A Traditional IRA allows you choose from investment products such as mutual funds, stocks, bonds, and ETFs, as well as bank products like CDs and money market savings.

What are the differences between a Roth IRA and a Traditional IRA?

While Roth and Traditional IRAs are both good choices when saving for retirement, there are many differences to keep in mind:

• Any earnings in a Roth IRA are federally tax-free after five years and age 59½. Earnings in a Traditional IRA are tax-deferred until withdrawn in retirement when they are taxed at your current rate.
• Contributions to a Roth IRA can be withdrawn at any time, tax and penalty-free. Withdrawals from a Traditional IRA before the age of 59½ are subject to taxes and a 10% federal penalty.
• Anyone with earned income under the age of 70½ can contribute to a Traditional IRA. Roth IRAs are restricted to those who do not exceed certain modified adjusted gross income limits.
• Traditional IRA contributions may be tax-deductible. Roth IRA contributions cannot be deducted.

Can I contribute to both a Roth and Traditional IRA?

You may contribute simultaneously to a Traditional IRA and a Roth IRA (subject to eligibility) as long as the total contributed to all (Traditional and/or Roth) IRAs equals no more than the contribution limits for the year of contribution.

Rollover IRAs

What is a Rollover IRA and why would I want to establish one?

A Rollover IRA is a retirement account specifically designed to receive transfers from a previous employer-sponsored retirement plan, such as a 401(k) or 403(b). By rolling over this account directly, you:

• Maintain the tax-deferred status of the account.
• Increase your investment choices to include mutual funds, stocks, bonds and ETFs, or bank products such as CDs and money market savings.
• Simplify the management of this account by being able to monitor it in the same place you monitor your other accounts.

How do I roll over my 401(k) or other qualified employer-sponsored retirement plan?

Your employer's plan administrator will be able to provide you with the documents needed to complete your request. If you need help with this process, please do not hesitate to contact our Rollover Help Desk at 1.800.774.4724. This is a free service that we provide to all customers.

How do I roll over my 401(k) or other qualified employer-sponsored retirement plan?

Your employer's plan administrator will be able to provide you with the documents needed to complete your request. If you need help with this process, please do not hesitate to contact our Rollover Help Desk at 1.800.774.4724. This is a free service that we provide to all customers.