IRA FAQ's
Can an individual contribute to a traditional
IRA if he or she has other retirement plans?
Yes, individuals can contribute to a traditional IRA whether
or not they are covered by another retirement plan. However,
they may not be able to deduct all of their contributions
if they or their spouses are covered by an employer-sponsored
retirement plan. [Note that contributions to a Roth IRA
are not deductible and income limits apply.] See Publication
590 for further information.
How can an individual convert a traditional IRA
to a Roth IRA?
A traditional IRA can be converted to a Roth IRA by:
Rollover - A distribution from a traditional IRA
can be contributed to a Roth IRA within 60 days after distribution.
Trustee-to-trustee transfer - The financial institution
holding the traditional IRA assets will provide directions
on how to transfer those assets to a Roth IRA with another
financial institution.
Same trustee transfer - As with the trustee-to-trustee
transfer, the financial institution holding the traditional
IRA assets will provide directions on how to transfer those
assets to a Roth IRA. In this case, things should be simpler
because the transfer occurs within the same financial institution.
A conversion results in taxation of any untaxed amounts
in the traditional IRA. Also, the conversion is reported
on Form 8606, Nondeductible IRAs.
Are there any restrictions on the things an IRA
can be invested in?
The law does not permit IRA funds to be invested in collectibles.
If an IRA invests in collectibles, the amount invested
is considered distributed in the year invested. The account
owner may have to pay a 10% additional tax on early distributions.
Here are some examples of collectibles:
- Artwork,
- Rugs,
- Antiques,
- Metals - there are exceptions for certain kinds of
bullion,
- Gems,
- Stamps,
- Coins - there are exceptions for certain coins minted
by the U.S. Treasury,
- Alcoholic beverages, and
- Certain other tangible personal property.
Check Publication 590, Individual Retirement Arrangements
(IRAs), for more information on collectibles.
Finally, IRA trustees are permitted to impose additional
restrictions on investments. For example, because of administrative
burdens, many IRA trustees do not permit IRA owners to
invest IRA funds in real estate. IRA law does not prohibit
investing in real estate but trustees are not required
to offer real estate as an option.
Can an IRA be rolled over into a qualified retirement
plan (e.g., 401(k), profit-sharing, etc.)?
An IRA can be rolled over into a qualified retirement
plan, assuming the qualified retirement plan has language
permitting such rollovers.
Can an IRA accept rollovers from a qualified retirement
plans?
Provided the IRA document permits rollovers, almost any
type of plan distribution can be rolled over into it. |
