Can I Contribute to a Traditional IRA? And
How Much?
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 $4,000 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 $4,000 limit applies to
total contributions to all IRAs (Traditional and Roth).
The IRA contribution limit per person will reach $5,000 per
person in 2008. If you reach age 50, you may make an additional catch-up contribution
(see next question).
Year Annual IRA Contribution Limit
2002 $3,000
2003 $3,000
2004 $3,000
2005 $4,000
2007 $4,000
2008 & later $5,000
Can I Contribute More If
I Am 50 Years of Age or Older?
Beginning in 2002, 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
|
|
2002-2004
|
$500
|
$3,500
|
|
2005
|
$500
|
$4,500
|
|
2006-2007
|
$1,000
|
$5,000
|
|
2008
|
$1,000
|
$6,000
|
What If I Don't Have $4,000?
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
$4,000, 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 2005, you can make
contributions until April 17, 2006.
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
|
|
2005
|
Full Deduction
Under $70,000
|
Partial Deduction
$70,000-$80,000
|
Full Deduction
Below $50,000
|
Partial Deduction
$50,000-$60,000
|
|
2006
|
Full Deduction Under $75,000
|
Partial Deduction $75,000-$85,000
|
Full Deduction Below $50,000
|
Partial Deduction $50,000-$60,000
|
If you are married, filing jointly, and your
spouse is covered by a plan at work, the deductibility for your contribution
phases out when your modified AGI is more than $150,000 and reaches zero at
$160,000.
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 $8,000 annually (up to $4,000 each).
If your combined income is less than $8,000, the combined IRA contributions are
limited to 100% of your income.
What If My Spouse Doesn't Work?
If one spouse has less than $4,000 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 $8,000 annually, divided between the
two accounts in any way desired, so long as neither account receives more than
$4,000.
Can I Transfer a Traditional 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.”
Is a Transfer the
Same as a Rollover?
No. A rollover moves money from an employer-sponsored retirement
account, such as a 401(k) or 403(b), into a Traditional IRA. You cannot roll
over money directly into a Roth IRA, but you may convert your rollover IRA into
a Roth IRA if you are eligible to do so. For more information, see our 401(k)
Rollover Information page.
Is There a Fee?
There is an annual $10 maintenance fee for IRA accounts. In addition, although
the Domini Funds are no load, certain fees and expenses apply to a continued
investment. These are described in the Prospectus.
Your personal
financial situation may differ, or present exceptions to some of the rules
outlined here. You may wish to consult a financial advisor. You may also want
to 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).
All examples provided are for illustrative purposes only. If your company offers a SEP or SIMPLE retirement plan, call 1-800-582-6757 to ask how to add the Domini
Social Equity Fund, Domini European Social Equity Fund, or Domini Social Bond
Fund to your plan.
The Domini Funds are subject to market fluctuations and are not insured.
You may lose money. Although the Domini Funds are no load, certain fees and
expenses apply to a continued investment that are described in the Prospectus.
There is, for example, an annual $10 maintenance fee for IRA accounts.
