Can I Contribute to a Traditional IRA? And How Much?

 

The information set forth below is intended only as a brief, general overview of certain federal income tax provisions. It should not be considered tax, legal, or investment advice. Domini Social Investments LLC, DSIL Investment Services LLC, and their affiliates and agents are not tax advisors, and do not provide tax advice.

 

Each person’s financial situation is unique. All information and examples provided here are for general illustrative purposes only, and are addressed in general to a hypothetical reader, not to you specifically. Tax law is complex, subject to change at any time, and has many rules, details, and exceptions. State and local tax law varies from federal tax law. To learn about federal tax law and rules, details and exceptions concerning IRAs, you should read IRS Publication 590 “Individual Retirement Arrangements (IRAs)” available at www.irs.gov or by calling the IRS at 1-800-TAX-FORM (1-800-829-3676). If you have questions and for tax advice, you should consult a financial or tax advisor before acting.

 

 

Can I Establish a Traditional IRA?
Generally, if you have earned income from a job or alimony, you can establish a Traditional IRA before the tax year when you reach age 70 ½. Contributions are fully tax-deductible if you do not participate in an employer-sponsored retirement plan. (See below for other limits on deductibility.) Beginning in the calendar year in which you reach age 70 ½, you can no longer make contributions to a Traditional IRA.

 

If I Am Covered by a Retirement Plan, Am I Eligible to Open an IRA?
You may have a Traditional IRA even if you are covered by a qualified pension, profit-sharing, or other retirement plan, but you may be limited in the amount of the contributions that are tax-deductible. (To be covered means that money is contributed to your account, whether or not you contribute yourself.) For limitations on deductibility, see below.

 

How Much Can I Contribute to IRAs Each Year?

You can currently contribute up to $5,000 or 100% of your taxable compensation for the year, whichever is less. Alimony is counted as earned income, but pension and investment income are not. The $5,000 limit applies to total contributions to all IRAs (Traditional and Roth).

 

If you reach age 50, you may make an additional catch-up contribution (see next question).

 

Year                 Annual IRA Contribution Limit

2008 & 2009                  $5,000

 

Can I Contribute More If I Am 50 Years of Age or Older?

If you reach age 50 before or during a given year, you can play “catch-up” with your retirement savings by contributing extra amounts to your IRAs for that year. The “catch-up” provisions apply to anyone who meets the age requirement and is otherwise eligible to contribute to an IRA.

 

Year	Catch-Up Contribution Limit	Total Contribution (50+ yrs) Limit
2008 & 2009	$1,000	$6,000

 

What If I Don't Have $5,000?
The law doesn't require a minimum contribution. You can start an IRA at Domini Social Investments with as little as $1,500. If your earned income is under $5,000, you can contribute all or part of it to an IRA.

 

When Can I Contribute?
You can open an IRA, or contribute to an existing IRA, at any time from January 1 of a given year up to the tax filing day of the following year. The tax filing day is the absolute deadline, even if you have received an extension beyond that date for filing your tax return. For tax year 2008, you can make contributions to a Traditional IRA until April 15, 2009.

 

Is My IRA Contribution Tax-Deductible?
If you or your spouse do not participate in a corporate, government, Keogh, or other retirement plan, then your Traditional IRA contribution is generally fully tax-deductible, whatever your income level.

 

If you participate in an employer's qualified retirement plan on any day during the tax year, the deductibility of your contributions declines to zero between certain modified adjusted gross income (AGI) ranges. 

 

Tax Year	Married Filing Jointly		Single Filer or Head of Household
2008	Full Deduction Under $85,000	Partial Deduction $85,000-$105,000	Full Deduction Below $53,000	Partial Deduction $53,000-$63,000
2009	Full Deduction Under $89,000	Partial Deduction $89,000-$109,000	Full Deduction Below $55,000	Partial Deduction $55,000-$65,000

If you are married, filing jointly, and your spouse is covered by a plan at work, for tax year 2008 the deductibility for your contribution phases out when your modified AGI is more than $159,000 and reaches zero at $169,000. For tax year 2009 the deductibility for your contribution phases out when your modified AGI is more than $166,000 and reaches zero at $176,000.

What If Both My Spouse and I Have Earned Income?

If both of you have earned income, you can establish separate Traditional IRAs and can contribute up to a total of $10,000 annually (up to $5,000 each). If your combined income is less than $10,000, the combined IRA contributions are limited to 100% of your income.

 

What If My Spouse Doesn't Work?
If one spouse has less than $5,000 of earned income, a Traditional IRA can be established based on the income of the higher-earning spouse. In this case, the combined total contributed may be up to $10,000 annually, divided between the two accounts in any way desired, so long as neither account receives more than $5,000.

 

Can I Transfer an IRA from Another Company to Domini?
You can transfer a traditional or Roth IRA from one mutual fund manager to another as often as you like. To transfer an IRA from another company to Domini, please visit Account Maintenance Forms and select “IRA Transfer Form.”

 

Can I Roll Over an Account Such as a 401(k) Plan to a Domini Traditional IRA?

Yes. Through a rollover, you can move assets from an employer-sponsored retirement account, such as a 401(k) or 403(b), into a Domini Traditional IRA. You cannot roll over money directly into a Domini Roth IRA. You may convert your rollover IRA into a Roth IRA if you are eligible to do so. For more information, please see our 401(k) Rollover Information page. 

 

Is There a Fee?
There is an annual $10 maintenance fee for Domini IRA accounts. In addition, although the Domini Funds Investor class shares are no load, certain fees and expenses apply to a continued mutual fund investment. These are described in the Prospectus.

 

If your company offers a SEP or SIMPLE retirement plan, call 1-800-582-6757 to ask how to add the Domini Funds to your plan.

 

The Domini Funds are subject to market fluctuations and are not insured. You may lose money. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost.