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What
is an IRA?
An IRA is a tax-deferred retirement account which allows an individual
to set aside a certain amount per year with earnings tax-deferred until
withdrawals begin at age 59 ½ or later. Only those who do not
participate in a pension plan at work or who do participate and meet
certain income guidelines can make deductible contributions to an IRA.
All others can make contributions to an IRA on a non-deductible basis.
This non-deductible type of contribution does not qualify as a deduction
against income earned that year, but interest accumulates tax-deferred
until the funds are withdrawn.
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What
types of IRAs are available?
PTI ProDirect offers a wide range of IRAs, including Traditional, Roth,
SEP and Rollover IRAs. Remember that in order to take advantage of the
tax benefits offered by the Internal Revenue Code for a given year,
customers must open and fund their IRAs by April 15 after the close
of the tax year.
Are
there fees for opening a PTI ProDirect IRA?
No. Although PTI ProDirect does not charge an annual custodial fee,
or an account termination fee, there is a monthly commission minimum
of $10.00 or USD equivalent.
What is the Minimum
Deposit Required to open a PTI ProDirect IRA account?
The minimum deposit required is US $4,000. (This is the minimum deposit
required for a Stock Only Cash Account, which is how your PTI ProDirect
IRA will be structured.)
What
is a Traditional IRA?
A Traditional IRA (Individual Retirement Account) is a self-sponsored
retirement savings plan. Contributions to an IRA may or may not be tax-deductible
depending on your adjusted gross income. Consult your tax advisor to
answer questions about your eligibility for tax deductions.
How
do I know if I am eligible to make a contribution?
You can contribute to a Traditional IRA if you have earned income and
are under the age of 70 ½. If you are not employed, but have
a spouse who is, your spouse may be able to make a contribution on your
behalf.
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How much can I contribute?
Review the IRA Contribution Limits page.
When
may I withdraw funds from my IRA?
In general, withdrawing your IRA prior to age 59 ½ means you'll
have to pay a 10% early withdrawal penalty. You may avoid the penalty
if you're withdrawing because of:
- First time home purchase ($10,000
lifetime limit)
- Qualified education expenses
- Substantially Equal Periodic
Payments - 72(t)
- To pay for health insurance
premiums if unemployed more than 12 consecutive weeks
- Medical Expenses in excess
of 7.5% of your AGI (Adjusted Gross Income)
- Death
- IRS Levy
How
do I take a distribution?
To withdraw funds, complete our Withdrawal Instructions form under Account
Management. Customers may request Normal, Early, Early with Exception,
Disability, Death, and Excess Contribution Distributions. Please choose
the correct Distribution type on Withdrawal Instructions form under
Account Management. You will need to also specify the amount of withdrawal
and tax withholding instructions.
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What
is an IRA Rollover?
A rollover requires a distribution from an IRA or qualified plan, which
is then rolled over into an IRA account within a 60 day period to complete
the rollover transaction. While the rules for rollovers and transfers
differ, they accomplish similar objectives. Both rollovers and transfers
facilitate the tax-free movement of IRA monies from one trustee or custodian
to another. One kind of IRA
rollover involves moving monies from an existing IRA account to another
IRA account, and another requires a distribution from a qualified pension,
profit-sharing, or 403(b) Tax-Sheltered Annuity plan. In either case,
you have 60 days in which to complete the rollover. One IRA rollover
per 12 calendar months is permitted.
Can
I Rollover an existing IRA with another broker to PTI ProDirect?
Yes. A rollover takes place when the IRA funds are paid directly to
you and re-deposited (roll-over) into an IRA within 60 calendar days
of receipt. The 60-day period begins the day after you receive the payment.
A rollover transaction from an IRA may not occur more than once during
a 12-month period. This 12-month rule applies to each separate IRA you
own and is determined from the date the IRA funds are received. (The
12-month limitation does not apply if the funds are transferred directly
from one financial organization into another or if they are rolled over
or directly rolled over from a Qualified Plan into an IRA).
What
is a Direct Rollover?
A direct rollover is a distribution from a qualified retirement plan
such as a pension, profit-sharing, Keogh (HR-10), or 403(b) Tax-Sheltered
Annuity program, which is sent on your behalf directly to a new trustee/custodian.
A direct IRA rollover can be accomplished by asking the administrator
of your qualified plan to make the distribution directly to the new
trustee/custodian. Only one direct rollover from an IRA account to another
IRA account is permitted in any one-year period. Values distributed
from a qualified retirement plan, which are not directly rolled over
into an eligible qualified plan or IRA are subject to a 20% federal
withholding tax.
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How
do I move my current employer-sponsored retirement plan to a PTI ProDirect
Rollover IRA?
Open a PTI ProDirect Rollover IRA and in the funding section a letter
will be created that informs your benefits administrator that you would
like to directly roll over your distribution into your PTI ProDirect
IRA account. You will have to sign a form authorizing the move. Next,
your employer will transfer your payout to your PTI ProDirect IRA account,
or they will provide you with a check made out to IB. If the latter
is the case, once you receive the check you should deposit it immediately
into your PTI ProDirect Rollover IRA. The deposit must be within the
time frame permitted under the Internal Revenue Code.
What is a Plan Sponsor?
A Plan Sponsor is an employer who sets up a qualified retirement plan
such as a 401(k) plan.
Is There
a Way to Avoid the 20% Withholding Tax on My Retirement Plan Distribution?
Yes. If your account balance is sent directly by the plan administrator
to another qualified plan or to an IRA trustee/custodian on your behalf,
the 20% withholding tax requirement does not apply. However, if you
do not request a direct rollover of your distribution, 20% will be withheld
for federal income taxes.
What
is a Conduit IRA?
A conduit IRA is a separate IRA (i.e., non-commingled) account established
to receive a distribution from a qualified plan having certain characteristics
worth preserving. A good example is a rollover from a 403(b) Tax-Sheltered
Annuity into an IRA. Such an IRA may not be rolled back into a 403(b)
account at a later date if your funds have been commingled with other
IRA monies. A conduit IRA preserves the flexibility to roll the monies
back into the original plan and take advantage of loans or other features
not available in an IRA. There are no special requirements to establish
a conduit IRA. It is only necessary to ensure that the monies are not
commingled with any other IRA monies.
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How
do I transfer my existing IRA to PTI ProDirect?
IB's Automated Customer Account Transfer System (ACATS) is the National
Securities Clearing Corporation's (NSCC) central processing system for
the transfer of positions and accounts between brokerage firms that
are participants of the NSCC's ACAT program. The NSCC's ACAT system
enables your broker to enter, review, and settle account transfers in
a fully automated system. Requests for Automated Transfer of Assets
must be sent to the receiving broker. Your PTI ProDirect account must
be opened and approved before you begin the ACAT. Under normal circumstances,
an ACAT should take between four to eight business days. With some circumstances,
such as an attempt to transfer unsettled funds, positions that are not
paid in full, or restricted stock shares, this process could take longer.
The ACAT feature is available under Account Management. Choose Deposit
Instructions from the customer menu. You will be prompted to select
the firm and account number at the firm.
Is there
a maximum IRA transfer or rollover?
In most cases there is no limit on the amount you may transfer or roll
over into an IRA because you are simply moving the money from one type
of retirement plan to another. You may transfer or roll over your IRA
regardless of your age. However, if you are 70½ or older, you
must receive a minimum required distribution from your IRA each year.
This should be taken into account in planning your rollover.
Can
I contribute to an IRA if I already have a retirement plan through my
employer?
Yes. You can contribute to a Roth IRA or Traditional IRA regardless
of whether or not you have an employer-sponsored plan. In fact, IRAs
are a great way to enhance your savings. While participation in a retirement
plan does not change how much you can contribute to an IRA, it can affect
whether or not you're eligible to deduct your contributions to a Traditional
IRA on your tax return. But keep in mind that as long as you're under
age 70½ and you have earned compensation, you can always make
nondeductible contributions to a Traditional IRA and benefit from tax-deferred
earnings.
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What
is a Roth IRA?
The Taxpayer Relief Act of 1997 created the Roth IRA, which allows tax-free
withdrawals. Contributions to a Roth IRA are not deductible and the
maximum annual contribution is the lesser of 100% of compensation or
$3,000. Non-working spouses may also contribute up to $3,000 to a Roth
IRA. For individuals age 50+, contributions may be increased by $500.
Taxpayers with joint adjusted gross income under $150,000 (under $95,000
for single taxpayers) may make full Roth IRA contributions. Contributions
may be made beyond age 70½ and qualified distributions from a
Roth IRA are tax-free, subject to IRS limitations. There are no required
minimum distributions on Roth IRAs.
To be eligible
for conversion, adjusted gross income cannot exceed $100,000 (not counting
the income from the conversion). The conversion amount is taxable at
ordinary income rates, but the 10% premature distribution penalty tax
does not apply.
Holders of existing IRAs must
convert to a Roth IRA before transferring to PTI ProDirect.
What
is a "catch-up" IRA contribution, and am I eligible?
The name says it all - catch-up contributions are specifically designed
to help those who are getting closer to retirement catch up on their
retirement savings. You're eligible as long as you're at least 50 years
old during the year the contribution is for, and of course, as long
as you meet the eligibility requirements for Traditional or Roth IRAs.
Click here for contribution limits.
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Who's eligible to make
a contribution to a Roth IRA?
Eligibility to make Roth IRA contributions are determined by your Modified
Adjusted Gross Income (MAGI):
MAGI Contribution
- Single filers
< $95,000 Full contribution
$95-110,000 Partial contribution
$110,000 + No contribution
- Married filing joint
<$150,000 Full contribution
150-160,000 Partial contribution
$160,000 + No contribution
- Married filing separately
<$10,000 Partial contribution
$10,000 + No contribution
To see if you're eligible to
make a Roth IRA contribution, consult your tax advisor or see IRS Publication
590.
Can I still contribute
to a Roth IRA if I'm older than 70 ½ and I'm still working?
Yes, provided the contribution does not exceed your earned income for
the year and you meet AGI eligibility guidelines.
Can I deduct my Roth
IRA contribution?
No, contributions to a Roth IRA are not tax-deductible.
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When may I withdraw
my Roth IRA earnings income tax free?
Roth IRA earnings may be withdrawn tax-free if your Roth IRA has been
established for at least five years and one of the following apply:
- Age 59 ½
- Disability
- Death
- First time home purchase ($10,000
lifetime limit)
Can I convert my Traditional
IRA to a Roth IRA?
You must perform this conversion before you transfer your IRA to PTI
ProDirect. Your Modified Adjusted Gross Income can't exceed $100,000
(single or joint filers) in the year of the conversion.
Can I rollover a distribution
from my retirement plan through my employer into a Roth IRA?
No.
When am I required to
begin taking distributions from my Roth IRA?
You're not required to take distributions from a Roth IRA as long as
you live. You can allow your money to grow in a Roth IRA free of current
taxes for as long as you choose.
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Can
I have both a Traditional and a Roth IRA?
Yes, you can. But remember that you can only contribute up to $3,000
per year to any combination of Traditional and Roth IRAs that you have.
You cannot contribute $3,000 to each. On the other hand, your annual
$2,000 contributions to a Coverdell ESA are entirely separate from the
$3,000 yearly contribution limit for Traditional and Roth IRAs.
What
is a 403(b) Tax Sheltered Annuity?
A Tax-Sheltered Annuity (TSA), also known as a 403(b) plan is named
after a section of the Internal Revenue Code. It is an employer sponsored
retirement savings program. Participation is limited by law to employees
of public educational organizations and certain nonprofit organizations.
The vast majority of participants are teachers in public schools, colleges
and universities.
Can I rollover a 457
deferred compensation plan through my employer into an IRA when I leave
my employer?
Yes! Balances in a government 457(b) deferred compensation plans are
eligible to roll into an IRA.
Can
I transfer my current pension plan to an IRA at PTI ProDirect?
If you are self-employed and have set up your own self-directed retirement
plan that offers investing flexibility, and have an independent administration
firm which neither limits investment choices nor gives investment advice,
this plan can be transferred into a retirement trust at PTI ProDirect
through a Direct Rollover.
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What
is a mandatory distribution?
In a Traditional IRA, you are required by law to begin taking distributions
from your IRA in the year you reach age 70½. The amount of the
distribution is based on your age and the value of your account. Internal
Revenue Service Publication 590 provides the information to calculate
the minimum distribution. Required minimum distributions must start
no later than April 1 of the year following the year in which you attain
age 70½. Failure to take the required minimum distribution results
in an IRS penalty tax of 50% of the amount that should have been distributed.
What
is the tax consequence of taking a distribution?
Distributions from a Traditional IRA are treated as income to you. You
will receive an IRS form 1099R each January summarizing the amount distributed
and the taxes withheld, if any. In a Roth IRA, if you take a distribution
after the account has been open five years, the distribution will not
be included in your income. If taken within the 5-year period, it will
be taxable, like a Traditional IRA distribution.
What
are the tax consequences of an "early" withdrawal?
An "early" withdrawal is generally one taken before age 59½
in a Traditional IRA or within the first five years of a Roth IRA. In
addition to the amount added to your income, the IRS may assess an additional
10% penalty. You should consult with your tax advisor regarding the
tax consequences.
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Are
IRA accounts subject to any restrictions?
Yes. The IRS does prohibit certain transactions on Traditional IRAs.
Examples include: borrowing money from your IRA, contributing over your
annual limit, rolling funds over from another IRA after the sixty (60)
days has expired, or forgetting to take an annual distribution after
you have reached 70 ½. As the IRS penalties on these transactions
can be severe, it is best to review your situation with your tax advisor
How do I open an IRA
Account?
Go to the PTI ProDirect home page and select Open Account.
What
can I Invest in?
Stocks, covered call writing (covered shares are restricted), buying
calls (funds equal to the aggregate exercise value of the long calls
are restricted), and buying puts (shares subject to exercise are restricted),
selling cash secured puts, spreads securities with European style expiration,
futures contracts, and futures options. The PTI ProDirect IRA is structured
as a Stock Cash Account (if you choose to trade only stocks) or as a
Stock Options Level I Account (if you choose to trade options in your
IRA). IRAs may also invest in US dollar denominated futures contracts,
and future option contracts.
What commissions will
I pay?
PTI ProDirect IRA account holders benefit from the same low commission
rates as other PTI ProDirect customers.
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Who
is the Custodian?
The Delaware Charter Guarantee & Trust Company, doing business as
Principal Trust Company, a Company of The Principal Financial Group,
will act as the Custodian for all PTI ProDirect IRAs. As Custodian,
Principal Trust Company will handle certain functions, including acting
as trustee for the retirement plan; maintaining such plans in compliance
with applicable federal laws and regulations; maintaining account information,
and preparing and filing IRS forms on behalf of PTI ProDirect. Principal
Trust Company's address is 1013 Centre Road, Wilmington, Delaware 19805.
What are the types of
Deposits allowed?
Wire Transfers, or Cash are currently the only available deposit options.
Before you contribute or transfer funds, you must fill out an IRA Deposit
Form. Click here for instructions on sending funds for IRAs.
Can I transfer between
PTI ProDirect IRA accounts?
No.
What type of Installment
Payouts are allowed?
PTI ProDirect only allows a lump sum distribution payment which can
be made on-line.
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