Harbor Funds | Frequently Asked Questions - Roth IRA

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Roth IRA
Do shareholders have to pay Harbor an annual custodial fee for their IRA accounts? Show
No. As a Harbor Funds shareholder you pay no annual custodial fees for your IRA investment with Harbor. This means that the full amount of your IRA contribution is credited to your account. This distinguishes Harbor from those mutual fund families that charge annual custodial fees on IRA accounts. However, other fees and expenses do apply to a continued investment in a fund and are described in the current prospectus.
How much may I contribute to a Roth IRA? Show

Contribution limits are based on your Modified Adjusted Gross Income (MAGI).

Generally, individual annual contributions are limited to 100% of earned income, up to $5,000 ($6,000 if age 50 or older) for tax year 2011.

Spousal Contributions are allowed if married and filing jointly, are generally limited to 100% of earned income, up to $5,000 ($6,000 if age 50 or older) for tax year 2011.

To be eligible to make the full $5,000 ($6,000 if age 50 or older) contribution to a Roth IRA, your Modified Adjusted Gross Income (MAGI) must fall within a certain range.

To find the exact contribution you are eligible for, please see the MAGI for Roth IRA Contribution Limits.

When must Roth IRA contributions be made? Show
Contributions must be made before the filing date for an individual's income tax return in the following year, not including extensions (generally, April 15th).
Are there age restrictions on making Roth IRA contributions? Show
No.
I opened a Roth IRA but just found out my MAGI is too high; what can I do? Show
If you converted all or a portion of your Traditional IRA to a Roth IRA you must complete and file Form 8606 (Nondeductible IRA's) with your Federal tax return. If you did not qualify for such a conversion due to income limitations, filing status or another reason, then you may be required to recharacterize the amount converted.
Can I contribute to both a Traditional and Roth IRA? Show
Yes, as long as the aggregate contributions do not exceed annual IRA contribution limits for the applicable tax year of the contribution.
Do I have to wait until the day I reach the age of 50 to take advantage of making a catch up contribution? Show
No, you may make the catch up contribution at any time during the calendar year in which you reach age 50.
I am an active participant in my employer's 401(k) plan, does this affect my ability to contribute to a Roth IRA? Show
No. An individual may actively participate in an employer-sponsored 401(k) plan or in any other type of defined contribution or defined benefit plan without affecting the ability to make a Roth IRA contribution.
Do the required minimum distribution (RMD) rules applicable to a Traditional IRA apply to a Roth IRA? Show
No, the RMD rules applicable to a Traditional IRA do not apply to a Roth IRA.
When are Roth IRA distributions considered qualified? Show
A distribution form a Roth IRA is a qualified distribution and, therefore the earnings are tax and penalty-free, if it is paid after theh Roth IRA owner reaches age 59½, or due to disability, or death, or for first-time purchase, and it is paid after five tax years.
What is an IRA conversion? Show
A conversion is a movement of assets from a Traditional IRA into a Roth IRA. Individuals may convert their Traditional IRAs into Roth IRAs if they meet certain eligibility requirements and comply with certain rules. A conversion is a taxable event.

Beginning in 2010, the Modified Adjusted Gross Income (MAGI) and filing status requirements for converting a traditional IRA to a Roth IRA are eliminated. Also, for any 2010 rollovers from an IRA other than a Roth IRA to Roth IRA, any amounts that would be included as income will be included in income in equal amounts in 2011 and 2012, or you can choose to include the entire amount in income in 2010.

Is a conversion an exception to the 10% premature distribution penalty? Show
Yes. An individual who converts a Traditional IRA to a Roth IRA is not subject to the 10% premature distribution penalty normally associated with distributions before age 59½ for the conversion transaction, provided it is held in the Roth IRA for at least 5 tax years.
Do I have to file any special tax forms because of my conversion? Show
If you converted all or a portion of your Traditional IRA to a Roth IRA you must complete and file Form 8606 (Nondeductible IRA's) with your Federal tax return.
What is a contribution recharacterization? Show
A contribution recharacterization is either the "reversal" of a current year regular contribution (plus earnings) to a Roth IRA, or the "reversal" of a conversion or failed conversion to a Roth IRA with a subsequent transfer of the amount plus earnings back into a Traditional IRA.
May I convert, recharacterize, and then convert again? Show
Yes, however there are restrictions. In order to re-convert after a previous conversion and recharacterization, you must wait until either the tax year after your original conversion or 30 days after your recharacterization, whichever is later.