Education & FAQs

Traditional IRA
What are the differences between a Traditional IRA and a Roth IRA? Show
Traditional and Roth IRAs each have their advantages and disadvantages, depending on your personal circumstances now, and at retirement age. To help you decide which option is right for you, please review our Traditional vs. Roth IRA document.
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 Traditional IRA? Show
Individual annual contributions are limited to 100% of earned income, up to $5,500 ($6,500 if age 50 or older) for tax years 2017 and 2018. Unlike a Roth IRA, there are no limitations on maximum earned income to contribute to a Traditional IRA.

Spousal Contributions are allowed if married and filing jointly, and are generally limited to 100% of earned income, up to $5,500 ($6,500 if age 50 or older) for tax years 2017 and 2018.
I do not have any earned income. Can I still have a Traditional IRA? Show
Contributions to a Traditional IRA must be made from earned income; however if you are married, filing jointly, and your spouse has earned income, your spouse may contribute to an IRA on your behalf.

If neither you nor your spouse has earned income, you may not contribute to an IRA; however if you previously established an IRA while one of you had earned income, you may continue to hold your IRA at Harbor Funds without making additional contributions.

What is earned income? Show
Earned income is income received for personal services rendered. Passive income, such as income from an investment, is not considered earned income for purposes of making an IRA contribution.
What is a spousal IRA contribution? Show
Unlike the regular IRA contribution rules, in which contributions are based on the individual's own compensation, the spousal IRA contribution rules allow lower-compensated or non-compensated spouses to use their spouse's compensation when determining the IRA contribution limit. You can make a spousal contribution to your IRA if you are legally married, you file a joint federal income tax return, and the receiving spouse meets certain compensation requirements.

Spousal contributions are generally limited to 100% of earned income, up to $5,500 ($6,500 if age 50 or older) for tax years 2017 and 2018.

Please consult with a tax adviser for more details.

What is the deadline for making contributions to a Traditional IRA? 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 Traditional IRA contributions? Show
After age 70½, contributions can no longer be made to a Traditional IRA. There is no minimum age requirement for making contributions to a Traditional IRA.

Note that in the year you reach age 70 ½, you are still permitted to make a catch-up contribution for the prior tax year up until the tax filing deadline, not including extensions (generally, April 15).

Can I contribute to both a Traditional and Roth IRA? Show
Yes, as long as the aggregate contributions do not exceed your 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 make a catch up contribution? Show
No, you may make the catch up contribution at any time during the calendar year in which you reach 50 years of age.
I am an active participant in my employer's 401(k) plan. Does this affect my ability to contribute to a Traditional 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 Traditional IRA contribution.
Is my contribution to a Traditional IRA tax deductible? Show
All or a portion of your contribution to a Traditional IRA may be tax deductible. Deductibility depends upon your or your spouse's status as an active participant in an employer-sponsored retirement plan, your Modified Adjusted Gross Income (MAGI) and your tax filing status.

For more information, refer to our chart on Retirement Plan Limits.

What should I expect to receive from my IRA custodian if I made a contribution to my IRA? Show
Contributions are reported on Form 5498. However, the 5498 forms are not sent out until May 31st because shareholders have until the tax-filing deadline, generally April 15, to make a contribution to their IRA accounts. You are not required to attach Form 5498 to your Form 1040.
What should I expect to receive from my IRA custodian if I redeemed from my Traditional IRA within a given year? Show
If you redeemed shares from your IRA account, you will receive a 1099-R, generally by January 31st of the following year.
When can I redeem shares from my Traditional IRA? Show
Money can be withdrawn at any time. However, you may face IRS penalties. To avoid the penalties, IRA proceeds must remain in the IRA until you reach age 59 ½ or qualify for one or more of the penalty exceptions outlined in IRS Publication 590.
Can I leave proceeds in a Traditional IRA for an indefinite time? Show
Once a shareholder reaches age 70½ required minimum distributions (RMD) must be taken every year. If a distribution is not taken, the shareholder may face up to a 50% penalty on the RMD that should have been taken.
When must I take my first Required Minimum Distribution (RMD)? Show
Beginning with the year you reach age 70 ½, you must take your RMD by December 31st of each year; however you may defer your first RMD until April 1st of the year following the year you reach age 70 ½.
What balance and/or life expectancy table does Harbor use to calculate the dollar amount on my RMD letter? Show
Harbor Funds uses the Uniform Lifetime Table when calculating RMD amounts. Calculated amounts are included as a courtesy in the notice letters mailed, and may not be applicable to all IRA shareholders.
If I take my first RMD after Dec 31st of the year I turn 70½ but before April 1st of the following year, when must I take my second distribution? Show
If the first distribution is deferred until the year following the year you reach age 70½ (but taken before April 1st), the second distribution must still be taken by December 31st of that year, which will result in two distributions in that calendar year.
If I have multiple IRAs, do I have to take my RMD from each IRA separately? Show
No. You may elect to receive an aggregate distribution from one IRA or a combination of IRAs held at different companies; however, it is your responsibility to ensure that the required amount for all of your IRA accounts has been taken for the year.
If I made a charitable distribution, does that dollar amount count towards my RMD? Show
Qualified charitable distributions (QCDs) that are reported on your federal tax return may be used to satisfy RMDs. The requested distribution check must be made payable to the receiving charity and not you, the IRA holder.
I have several IRAs can I contribute the allowable contribution limit to each one? Show
No. You may split your contribution among multiple IRAs, but the aggregate annual contribution to all IRAs cannot exceed the annual IRA contribution limits for the applicable tax year of the contribution.
How do I know if I qualify for tax relief in the event of a natural disaster? Show
For information regarding those that may be entitled to tax relief in the wake of a natural disaster, please refer to the IRS website containing the most current press releases along with their corresponding forms of relief. Shareholders may receive assistance from the IRS in the mode of extensions and other various forms of relief if they qualify.