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Frequently Asked Questions
About Traditional IRAs
Anyone under
age 70½ with earned income can contribute to a traditional
IRA. Contributions may be
tax
deductible, and taxes on earnings are deferred until you
withdraw funds from the account, so
your investments have the
opportunity to compound faster.
About
Simplified Employee Pension (SEP) IRAs
A
Simplified Employee Pension Plan, commonly known as a SEP
IRA, is a retirement plan
specifically designed for self-employed
people and small-business owners. Its key features
are highlighted
below. When establishing a SEP IRA plan for your business,
you and any
eligible employees establish your own separate
SEP IRA; employer contributions are then
made into each eligible
employee’s SEP IRA.
For more specific questions, e-mail us at info@MidasFunds.com or
contact Midas Funds Shareholder Services at 1-800-400-MIDAS
(6432), 8 a.m.-6 p.m. Eastern Time.
What
is a Traditional IRA?
How
much can I put in a Traditional IRA each year?
Under
what circumstances can I take an early distribution (before
age 59½)
from my Traditional IRA without an early
withdrawal tax penalty?
Can
I take money from my Traditional IRA for a home purchase?
I
contributed too much money to my Traditional IRA.
What can
I do if the tax year deadline has lapsed?
I
do not want to convert my entire Traditional IRA to a Roth
IRA.
Can I convert only a portion of it to minimize my
incurred tax?
If
my Traditional IRA contains non-tax deductible contributions,
can I
convert just that part of my savings that is deductible
to avoid paying taxes?
What is a Traditional IRA?
A
Traditional IRA enables individuals to save earned income
for retirement until age 70-½. Contributions
can be tax deductible and taxes on earnings are deferred until
the funds are withdrawn upon retirement.
Traditional IRAs
can be funded by an individual for his/her own savings,
an employer on behalf of an employee or by rollovers
received from qualified retirement plans.
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How
much can I put in a Traditional IRA each year?
Individuals
with earned income can contribute up to $5,000 for
the 2009 tax year. Individuals age 50 and over are
able to make an additional $1,000 catch up contribution from past earned
income.
See "Traditional
IRA Annual Contribution Amounts and Tax Deductibility" for more details.
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Under
what circumstances can I take an early distribution (before
age 59-½)
from my Traditional IRA without an early
withdrawal tax penalty?
You
are able to take a distribution from your Traditional
IRA for
- a first-time home purchase ($10,000
lifetime limit),
- higher education expenses,
- non-reimbursed
medical expenses up in excess of 7.5% of adjusted gross
income,
- disability expenses,
- death expenses,
- health insurance premium expenses while
unemployed and
- substantially equal period payments.
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Can
I take money from my Traditional IRA for a home purchase?
Yes,
you can withdraw funds from your Traditional IRA for
a first-time home purchase for you and your immediate
family members. You can take up to a lifetime total of
$10,000 per individual and your distribution must be
used within 120 days of receipt. It is advised that you
consult with a financial advisor more details.
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I
contributed too much money to my Traditional IRA.
What
can I do if the tax year deadline has lapsed?
You
can take a distribution only for the excess contribution
amount but you will be penalized 6% for each year the
excess contribution remained in your Traditional IRA.
When you take withdraw your funds, you will need to
file IRS Form
5329.
Caution: Depending on your age, your withdrawal
may result in double taxation for the same funds.
It
is advised that you consult with a financial advisor
for more details.
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I
do not want to convert my entire Traditional IRA to a Roth
IRA.
Can I convert only a portion of it to minimize
my incurred tax?
Yes.
Partial conversions to Roth IRAs are allowed as are
conversions from a number of different Traditional
IRAs.
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If
my Traditional IRA contains non-tax deductible contributions,
can I convert just that part of my savings that is deductible
to avoid paying taxes?
No.
You can not designate which portion of your account
is converted, even if you do a partial conversion.
The distribution of your funds will include a proportional
mix of tax deductible and non-tax deductible contributions
from ALL of
your Traditional IRAs.
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