Who may open a Traditional IRA?
Anyone under age 70 and 1/2 who earns wages or a salary (even if self-employed)
can open and contribute to an IRA. If you have a working spouse, you can both open
an IRA. If you have a non-wage earning spouse (i.e., one who received no compensation
during the year) and file a joint return, that spouse can open a separate IRA.
How much may I contribute to a Traditional IRA?
You may contribute $5,000 for 2012 and $5,500 for 2013 if you are under age 50.
Individuals who have attained age 50 may contribute up to $6,000 for 2012 and $6,500
for 2013. If you file a joint return, the same amount may also be contributed to
a spousal IRA even if one spouse has little or no compensation. The maximum combined
contribution is limited to the previously mentioned contribution limits or 100%
of your combined earned income, whichever is less.
How do I know if I may take a deduction?
You may deduct the entire contribution if:
- Neither you nor your spouse participates in a retirement program where you work.
This is true regardless of your income; or
- You are single, actively participate in a retirement program and your adjusted gross
income is less than the minimum amount indicated in the phase-out range in the chart
below; or
- You are married, either you or your spouse actively participates in a retirement
plan, you file a joint return and your adjusted gross income is less than the minimum
amount indicated in the phase-out range in the chart below.
You may take a partial deduction if:
- You are single, participate in a retirement plan and your adjusted gross income
is within the phase-out range; or
- You are married, file a joint return, one or both of you participate in a retirement
plan and your adjusted gross income is within the phase-out range; or
- You are married and you file a separate return or your spouse participates in a
retirement plan and your income is less then $10,000.
- The Adjusted Gross Income (AGI) phase-out limits gradually increase each year. The
maximum deduction available to active participants in an employer-sponsored retirement
plan is reduced proportionately over the "phase-out" range. Active participants
with income above the phase-out range are not entitled to any deduction.
The phase-out limits are as follows:
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Single Taxpayers
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Married Taxpayers Filing Jointly
|
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$50,000-$60,000
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$80,000-$100,000
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In all cases, refer to a qualified tax professional or the Internal Revenue Service
for specific information.
May I contribute to a Traditional IRA even if I cannot deduct it?
Yes, if you have earned income, you can always contribute to an IRA regardless of
the deductibility.
When may I withdraw?
You may withdraw from your IRA at any time; however withdrawals before age 59 and
1/2 may be subject to a 10% penalty tax. Please refer to the section on Distributions in the Disclosure Statement.
May I transfer an existing IRA to Parnassus?
Yes. There are no tax penalties and no limits on the amount you can transfer. Just
fill out the IRA Transfer
Request Form and mail it back to us and we will handle the transfer for
you.
May I rollover an existing IRA to Parnassus?
Yes. If you elect to receive a cash distribution from another IRA, you can avoid
paying current taxes on the distribution by "rolling it over" into a Parnassus
IRA. The rollover must be completed within 60 days. However, there are certain restrictions
imposed by the Internal Revenue Code on multiple rollovers within a 12-month period.
What's the difference between an "IRA rollover" and an "IRA
transfer"?
An "IRA rollover" occurs when you receive a lump sum distribution from
one IRA in cash and you reinvest that cash into another IRA within a 60-day period.
An "IRA transfer" occurs when you have one IRA custodian/trustee transfer
your money directly into another IRA and you never touch the money. So, if you already
have the money in your possession and you want to start a Parnassus IRA, you'll
be opening a "rollover" IRA. If your IRA is with another custodian and
you want to move that money into a Parnassus IRA, you can arrange for a "custodial
transfer" by filling out the IRA Transfer Request Form.
What about a "direct rollover" from my company's retirement plan
such as a 401(k) or 403(b) plan?
If you receive a distribution from your employer's qualified retirement plan,
you may avoid paying current taxes or having the mandatory 20% federal withholding
tax applied to your distribution by "directly rolling over" your distribution
from your current custodian into a Parnassus IRA. There are no limits on the amount.
Some distributions, such as a required minimum distribution after your attainment
of age 70 and 1/2 and distributions payable in substantially equal periodic payments
over ten or more years, are not eligible for a "direct rollover." You
can arrange for a "direct rollover" by contacting your current plan administrator
and requesting the proper paperwork.
Can I make contributions to my IRA automatically?
Yes. Parnassus offers automatic investment plans. You may arrange to have contributions
of $50 or more automatically deducted from your checking or savings account and
invested in your IRA. All automatic contributions are considered contributions for
the current tax year. When setting up your investment plan, make sure not to exceed
your annual contribution limit.
Are there any special fees?
There is a custodial fee of $15.00 a year or a onetime lifetime fee of $60.00 for
maintaining the IRA per participant. This means that even though you have multiple
accounts in your Roth, Traditional IRA or SEP, you are charged only a single $15
per year fee or $60 lifetime fee.
Who may open a Contributory Roth IRA?
Anyone who earns wages or a salary (even if self-employed) can open and contribute
to a Roth IRA provided you don't exceed the adjusted gross income limits in
the chart below. Also, there are no age limits as with a Traditional IRA. If you
are married and file a joint return, you and your spouse can both open a Parnassus
Roth IRA even though your spouse has no earned income. You may contribute to a Roth
IRA even though you are an active participant in an employer-sponsored retirement
plan, a government retirement plan, the social security system or the railroad retirement
system, or are receiving any type of retirement benefits.
How much may I contribute to a Roth IRA?
You may contribute $5,000 for 2012 and $5,500 for 2013 if you are under age 50.
Individuals who have attained age 50 may contribute up to $6,000 for 2012 and $6,500
for 2013. If you file a joint return, the same amount may also be contributed to
a Spousal Roth IRA even if one spouse has little or no compensation. The maximum
combined contribution is limited to 100% of your combined earned income. The annual
limit is reduced by any of your contribution made to a Traditional IRA. Also, contributions
to a Roth IRA are phased out based on your adjusted gross income (AGI) for the taxable
year as follows:
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Married Taxpayers Filing Jointly
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Single Taxpayers
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Married Taxpayers Filing Separately
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$159,000-$169,000
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$101,000-$116,000
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$0-$10,000
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Earned income is considered:
- All wages and salary you earn from employment;
- Income from tips, professional fees, bonuses, and commissions;
- Money earned as sole proprietor or partner for personal services rendered; and
- Alimony which you report on your taxes.
Earned income does not include:
- Money you receive from pensions, annuities or other types of deferred compensation;
and
- Earnings on investments, interest, dividends or rental income, and proceeds from
the sale of investments.
What is a Rollover Roth IRA?
There are two types of Rollover Roth IRAs: Roth IRA to Roth IRA and Traditional
IRA to Roth IRA. There is no yearly limit on the amount that may be rolled into
a Rollover Roth IRA. Balances in an employer's qualified retirement plan may
not be rolled over into a Roth IRA.
Roth IRA to Roth IRA Rollover
This transaction involves a distribution from one Roth IRA and a subsequent purchase
of another Roth IRA. The entire transaction must take place within 60 days, and
you are allowed to make a Roth IRA to Roth IRA rollover only once in any 12-month
period.
Traditional IRA to Roth IRA Rollover
An IRA holder may roll over (convert) their Traditional IRA to a Roth IRA. The 60-day
rule does apply; however, the rule allowing only one rollover per 12-month period
does not. You cannot make a Traditional IRA to Roth IRA rollover if:
- Your Adjusted Gross Income for the taxable year exceeds $100,000, or
- You are married, but file separate income tax returns.
IMPORTANT NOTE: The IRA holder must pay tax on all pre-tax dollars distributed from
the Traditional IRA.
An individual cannot roll over a qualified retirement plan or 403(b) plan distribution
to a Roth IRA. However, an individual can roll from a qualified plan to a Traditional
IRA and then roll (convert) the amounts in the Traditional IRA into a Roth IRA.
Can I transfer my Roth IRA?
Yes. There are no tax penalties and no limits on the amount you can transfer. Just
fill out the IRA Transfer
Request Form and mail it back to us and we will handle the transfer for
you.
If I cannot take a deduction for my Roth IRA contribution, why should I contribute?
The greatest benefit of a Roth IRA is that all earnings will be tax-free upon distribution.
This can make a big difference. The longer the contribution is in the IRA and the
more it earns, the bigger the benefit. Also, consider the goal of an IRA which is
to provide enough money to live comfortably during retirement.
When can I withdraw?
You can withdraw from your Roth IRA at any time, but withdrawals of earnings that
do not meet certain criteria (i.e., a non-qualified distribution) would be taxed
and may incur a 10% distribution penalty.
What is a Qualified Distribution?
A distribution of assets from a Roth IRA may be taken tax free for qualified distributions.
A qualified distribution is a distribution of assets that are held in a Roth IRA
for at least five taxable years (beginning with the first taxable year for which
the Roth IRA holder made a contribution) and one of the following events occurs:
- Attainment of age 59 and 1/2
- Disability
- The purchase of a first home up to a $10,000 lifetime limit
- Death
What is a Non-Qualified Distribution?
When an IRA holder takes a distribution from their Roth IRA that is not "qualified,"
the distribution is considered "non-qualified" and may be subject to tax
and/or IRS penalty. Whether it is subject or not depends on the type of assets that
are deemed distributed. The "ordering rules" specify that if you made
both contributory and conversion contributions (even if the contributions have been
maintained in separate IRA's), the assets distributed will be considered taken
in the following order:
1. Roth IRA annual contributory amounts
2. Converted assets that were taxable prior to the conversion
3. Converted assets that were non-taxable prior to the conversion
4. Roth IRA earnings
This distribution sequence allows you to withdraw, at any time, an amount equal
to or less than your annual contributory amounts without tax or IRS penalty. Once
the contributory assets have been depleted, your conversion assets will be distributed.
All converted assets are tax-free, however, a 10 percent penalty will apply if you
withdraw the taxable converted assets (#2 above) within five years of the conversion
and do not meet one of the exceptions (attainment of age 59 and 1/2, death, disability,
substantially equal periodic payments, health insurance, medical expenses, education
expenses and first-time home buyer). After the conversion assets have been exhausted,
the Roth earnings are distributed which may be fully taxable and may incur a 10%
IRS penalty.
Tax Questions about Roth IRAs?
The customer service representatives at Parnassus are happy to help you with your
questions about IRAs, however, Parnassus Investments is not responsible for determining
or maintaining records regarding your eligibility for tax benefits. You may want
to contact a qualified tax professional before opening a Roth IRA. For more information,
you may contact your local office of the Internal Revenue Service. For more detailed
information request IRS Publication 590, Individual Retirement Arrangements, by
calling the IRS at 1-800-TAX-FORM or going to their website at www.irs.gov.
Can I make contributions to my IRA automatically?
Yes. Parnassus offers automatic investment plans. You may arrange to have contributions
of $50 or more automatically deducted from your checking or savings account and
invested in your IRA. All automatic contributions are considered contributions for
the current tax year. When setting up your investment plan, make sure not to exceed
your annual contribution limit.
Are there any special fees?
There is a custodial fee of $15.00 a year or a onetime lifetime fee of $60.00 for
maintaining the IRA per participant. This means that even though you have multiple
accounts in your ROTH, Traditional IRA or SEP, you are charged only a single $15
per year fee or $60 lifetime fee.
An IRA transfer occurs when you have one IRA institution transfer your money directly
into another IRA institution and you never touch the money. An IRA rollover occurs
when you receive a lump sum distribution from one IRA in cash and you reinvest that
cash into another IRA within a 60-day period. So, if you already have the money
in your possession and you want to start a Parnassus IRA, you'll be opening
a IRA rollover. If your IRA is with another custodian and you want to move that
money into a Parnassus IRA, you can arrange for an IRA transfer and Parnassus will
manage the transfer process for you.
IRA Transfer
To have Parnassus transfer your IRA for you, just fill out the IRA Transfer Request Form and an IRA Application and mail them to us. We will handle
the rest of the transfer for you. You should check with your existing IRA custodian/financial
institution to see if they require a Signature Guarantee to complete the transfer.
Transfers can not be done online.
IRA Rollover
If you elect to receive a cash distribution from another IRA, you can avoid paying
current taxes on the distribution by "rolling it over" into a Parnassus
IRA. The rollover must be completed within 60 days. However, there are certain restrictions
imposed by the Internal Revenue Code on multiple rollovers within a 12-month period.
To open an IRA rollover account at Parnassus, fill out an IRA Application, indicate it's an IRA rollover, and
send it to us by mail with your check.