IRA stands for an Individual Retirement Account. 

There are two main types of IRAs: Roth IRAs and Traditional IRAs.

A Roth IRA is a tax-deferred Individual Retirement Account, with nondeductible contributions.

A Traditional IRA is a tax-deferred Individual Retirement Account , typically funded with tax deductible or pre-tax contributions.

There are also SEP IRAs and SIMPLE IRAs which can be set up by self-employed individuals or small employers to allow them and their employees to contribute to Traditional IRAs in place of another employer sponsored retirement plan.

An IRA can be opened on behalf of individuals of any age who have earned income from work or other compensation (as defined by the IRS to mean wages, salaries, commissions, self-employment income, alimony and separate maintenance, and nontaxable combat pay).

A Traditional IRA can be opened and contributions can be made if an individual has taxable compensation, as defined above.  For contributions to a Traditional IRA to be deductible, there are certain additional conditions to be satisfied, such as whether the individual or spouse, if any, is not covered by a retirement plan at work, or if they are, then income below certain limits. 

To be able to contribute to a Roth IRA, an individual’s income must be below certain amounts.

There is no age limit for contributing to either type of IRA.

For a particular tax year, in general, contributions to IRAs must be made during such year, or by about April 15 of the following year to be able to select prior year status for federal income tax purposes. The due date may be different in some places, and for state income tax purposes. Please consult a professional advisor for tax, legal and investment advice and refer to IRS Publications 590-A and 590-B, “Individual Retirement Arrangements (IRAs),” available online at irs.gov.

Tax-Deferral. Any earnings within the account are tax deferred while in the account. That means an individual does not have to pay annual income taxes on such income and capital gains, if any.

Tax-Free Withdrawals. Withdrawals of amounts contributed to a Roth IRA are not taxable. Withdrawals of any income earned within the account can also be tax free, provided the account holder has reached age 59 ½ and has held the Roth IRA for at least five years. Withdrawals of any gains prior to age 59 ½ or not meeting the five-year requirement may be taxable, and subject to an additional 10% federal income tax penalty unless an exception applies.

Tax-Deferral. Any earnings within the account are tax deferred while in the account. That means an individual does not have to pay annual income taxes on such income and capital gains, if any, which is a potential tax benefit. Withdrawals prior to age 59 ½ may be subject to an additional 10% federal income tax penalty.

Tax-Deductible Contributions. Annual contributions may be tax-deductible if the individual or spouse is not covered by a retirement plan at work, such as a 401(k) plan, at any time during the tax year.  If the individual or spouse is covered by a retirement plan at work, and if their modified adjusted gross income is above certain thresholds depending on filing status, the deductibility of annual contributions is limited or entirely phased out. Social security benefits received may adversely affect deductibility of contributions.

To the extent that contributions were deductible, then those contribution amounts, along with gains if any, upon withdrawal are taxable as ordinary income.

For Traditional IRAs, required withdrawals, “Required Minimum Distributions”, (“RMD”s) generally must begin when the owner of a Traditional IRA is of age 73, as of January 1, 2023, or possibly earlier in the case of an inherited Traditional or Roth IRA. Although original owners of Roth IRAs are not subject to required minimum distribution rules, inherited Roth IRA owners are subject to minimum required distribution rules.   

For a Traditional, SEP or SIMPLE IRA, the SECURE 2.0 Act, signed into law in December 2022, includes a provision increasing the age when RMDs must begin from age 72 to age 73, effective January 1, 2023.  If an owner becomes 73 in a particular year, there is an RMD, which can either be taken by December 31 of that year, or delayed, for taking no later than April 1 of the following year However, if the first RMD is delayed to April 1 of the following year, two RMDs would need to be taken in one tax year: the first by April 1,  to satisfy the required withdrawal for the prior year, and the second by December 31, to satisfy the required withdrawal for the then current year.  Failure to take an RMD could result in a federal income penalty tax of up to 25%.

Think of your Domini IRA as a community of caring individual investors who come together to make an impact based on shared values. They share the view that what’s good for ecological sustainability and human dignity can also be good for their personal prosperity too. At Domini, we use three tools to build a better tomorrow:

-we apply our impact investment standards to all of our investment portfolios

-we use our voice as owners seeking to create positive change in companies

-we invest in communities to help fill gaps left by traditional finance

Domini mutual funds focus exclusively on impact investing. All of Domini’s mutual funds are available in a Domini IRA.  An IRA from Domini offers one very important advantage: peace of mind. The Domini Funds only invest in companies that meet our proprietary environmental and social standards. These investment standards are the foundational framework that guide our research and analysis. They are applied consistently across all our Funds because we believe that is how all investing should be done. 

This means we seek to verify that a company’s core business model is aligned with our goals of ecological sustainability and human dignity before we invest in it. And it also means we evaluate a company’s relations with:

-its key stakeholders, including ecosystems

-local, national, and global communities

-customers

-employees

-suppliers

-investors

There are account level fees: an annual Domini IRA maintenance fee, for Domini IRA accounts, and possibly an annual paper delivery fee. Each fee currently is $15.  In addition, although the Domini mutual funds’ s Investor class shares are no load, there are fees and expenses that apply to an investment. These fees and expenses are a part of each Domini Fund’s annual operating expenses, and reflected in the net asset value of each fund’s shares, as stated in the Domini Funds’ prospectus.