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Account Configuration: IRA FAQs

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General FAQs

Contributions   

Distributions  

Rollover/Transfers

Form 5498

Form 5498-ESA

Retirement Planning

 
     
 

General IRA FAQs

 
   
     
 

 

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 who have (or who files a joint return with a spouse who) received taxable compensation 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as a deduction against income earned that year, but earnings accumulate on a tax-deferred basis until the funds are withdrawn.

What types of IRA accounts are available through my Place Trade Brokerage Account?
PT offers a wide range of IRAs, including:

  • Traditional
  • Traditional Rollover
  • Traditional Inherited
  • Roth
  • Roth Inherited
  • Simplified Employee Pension (SEP)
  • Simplified Employee Pension (SEP) Inherited

For complete descriptions of all of PT's available IRA accounts, see the IRA Information page. Please Note that other retirement account options are available outside of PT brokerage accounts via separate investment companies.

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 any fees for opening a Place Trade IRA?
Yes. IRA customers will be responsible for the US $7.50 quarterly fee charged by our trustee. Please also note there is a monthly commission minimum of US $10.00 (US $3.00 if you are age 25 or under) or the non-USD equivalent. PT does not charge an account termination fee. For additional information regarding the IRA Quarterly fee, see the Other Potential Fees page. Place Trade does not receive any portion of the fees excluding a portion of the actual commissions (but not the minimum $10.00 fee which can be waived with activity). Please note that our clearing firm charges the difference between $0.00 and $10.00

What is the minimum deposit required to open a Place Trade IRA account?
The minimum deposit required is US $3,000.

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.

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.

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 $5,500 for 2014 and $5,500 for 2015. Taxpayers who age 50 or older may contribute an additional $1,000. Non-working spouses may also contribute up to $5,500 ($6,500 if age 50 or older) to a Roth IRA. Taxpayers with joint adjusted gross income under $181,000 for 2014 and $183,000 for 2015 (the threshold for single filers is $114,000 for 2014 and $116,000 for 2015) 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 (RMD) on Roth IRAs.

You can convert a traditional IRA to a Roth IRA. The amount that you convert is taxable at ordinary income rates, but the 10% premature distribution penalty tax does not apply.

Can I have both a Traditional and a Roth IRA?
Yes, you can. But remember that you can only contribute up to $5,500 per year, or $6,500 per year if you are age 50 or older to any combination of Traditional and Roth IRAs that you have. You cannot contribute $5,500 to each. On the other hand, your annual $2,000 contributions to a Coverdell ESA are entirely separate from the $5,500 or $6,500 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 non-profit organizations. The vast majority of participants are teachers in public schools, colleges, and universities.

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 60-day period 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 PT home page. Select Open an Account and then choose Individual from the account type choices. Complete the online application.

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, long/short futures contracts, and long/short futures options (all combinations). The PT 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?
PT IRA account holders benefit from the same low commission rates as other PT customers.

Who is the Custodian?
Effective January 1, 2015, Equity Trust Company, a South Dakota trust company, has been appointed successor trustee with regard to certain tax-advantaged savings accounts previously supported by Delaware Charter Guarantee & Trust Company d/b/a Principal Trust Company and, in connection therewith, will provide certain record keeping, administration and compliance services with regard to such accounts. Please review the IRA Booklet for details.

 

 
     
 
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Contributions

 
   
     
 

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.

How much can I contribute?
Generally, you can contribute the lesser of $5,500 ($6,500 if you are age 50 or over) and your taxable compensation for the year (2014). This limit is the most that can be contributed to all IRAs, traditional or Roth, for a given year. If you file a joint return you may contribute the lesser of $5,500 ($6,500 if you are age 50 or over) and your combined compensation less your spouse's IRA contributions. The limits for 2015 are $5,500 and $6,500 for taxpayers age 50 or over.

Review the IRA Information page for additional information.

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.

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 to learn more about IRA contribution limits.

Who is 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 Limits

         
  2016   2017  
         
  Single filers 
>$117,000 Full contribution 
$117,000-132,000 Partial contribution 
$132,000 + No contribution
  Single filers 
>$118,000 Full contribution 
$118.000-133,000 Partial contribution 
$133,000 + No contribution
 
         
  Married filing jointly 
>$184,000 Full contribution 
184,000-194,000 Partial contribution 
$194,000 + No contribution
  Married filing jointly 
>$186,000 Full contribution 
186,000-196,000 Partial contribution 
$196,000 + No contribution
 
         
  Married filing separately
>$10,000 Partial contribution 
$10,000 + 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 70½ 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.

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. Learn more about funding your account or call us at 1-919-719-7200 for more information regarding funding your IRA.

When may I withdraw my Roth IRA contributions?
You may withdraw contributions at any time until the due date for your tax return for the year of contribution (including an extension if applicable). Earnings on the contributions must be included as income.

What is the SEP-IRA contribution deadline?
Your contributions may be completed by your tax filing deadline, including extensions, for a given tax year. On IRS Form 5498, Principal Trust Company will report contributions for the tax year that we receive the deposit.

Why is a prior year IRA contribution not available?
The election for a prior year contribution is available from January 1 to April 15 unless the deadline is extended by the IRS due to a weekend or holiday.

 

 
     
 
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Distributions

 
   
     
 


 

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.

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
  • To pay for health insurance premiums if you receive unemployment benefits for more than 12 consecutive weeks
  • Medical Expenses in excess of 7.5% of your AGI (Adjusted Gross Income)
  • Death
  • Disability
  • IRS Levy

Please speak to your tax advisor prior to taking a distribution to determine whether the 10% early withdrawal penalty will apply.

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.


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)

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.

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 1099-R 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.

Are periodic distributions allowed?
PT only allows a lump sum distribution payment which can be made on-line. 

 

 
     
 
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Rollover/Transfers

 
   
     
 

 

What is a direct IRA 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.

How can I move IRA assets to a different IRA account?
You may move IRA assets from an IRA or qualified plan through a transfer or a rollover. A direct transfer of cash or assets from an IRA or qualified plan to a new PT IRA account is generally tax-free and does not constitute a rollover. A rollover is a tax-free distribution of cash or assets from an IRA or qualified plan that you contribute to a new PT 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 roll over an existing IRA with another broker to PT?
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).

How do I move my current employer sponsored retirement plan to a Place Trade IRA?
Open a PT 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 PT Rollover IRA account. You will have to sign a form authorizing the move. Next, your employer will transfer your payout to your PT IRA account, or they will provide you with a check made out to PT. If the latter is the case, once you receive the check you should deposit it immediately into your PT Rollover IRA. The deposit must be within the time frame permitted under the Internal Revenue Code.


How do I transfer my existing IRA to a Place Trade IRA via ACATS?
It is easy to transfer your existing IRA to Place Trade and if you need assistance we will be happy to help you if you! You may set up an ACAT during the account application process or through Account Management. Place Trade uses the Automated Customer Account Transfer Service (ACATS) to transfer accounts via its clearing firm. The ACAT system 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 ACATS program. The NSCC's ACATS system enables your broker to enter, review and settle account transfers in a fully automated system. A request for an Automated Customer Account Transfer (ACAT) of assets must be sent to the receiving broker.

Please Note: Your PT account must be opened and approved before we will begin the ACAT process however you can set up the ACAT within the Funding section of the account application. Although the ACAT has been set up it will not be processed until your account has been fully approved and opened.

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. If you have not seen your account transfer completed (your assets in your Place Trade account) after 5 - 8 business days please give us a call at 1-919-719-7200 so that we may review and assist you with the process.


How do I set up an ACAT to transfer my account?
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. Please give us a call at 1-919-719-7200 and we will be happy to assist you.


How do I transfer my existing IRA to Place Trade through a non-ACATS method?
Place Trade provides paper transfer forms for IRA Rollover or Trustee-to-Trustee transfer. Both forms enable your existing broker to transfer your IRA funds by physical check or by wire transfer. Your PT account must be opened and approved before you begin transfer.

Under normal circumstances, the non-ACATS transfer methods should take between two to six weeks. The paper forms are available to print, complete, and mail to PT on our website by clicking IRA Rollover or Trustee-to-Trustee transfer.


How do I transfer my existing IRA from Place Trade?
If you wish to transfer your IRA account away from Place Trade to another broker, please call us and allow us the opportunity to do whatever we can to address any issues that may cause you to be unhappy with us and to move your account. We do not expect that you will be unhappy however if you are we want make sure that we know why you are unhappy and we want to do everything possible to see that you are happy. If you have spoken to someone at Place Trade and you are not satisfied with their response or have not found a resolution to your issue please call 1-919-719-7200 and ask to speak with Sarah Place directly regarding your concerns. (She will be happy to take your call!)

If you should decide to move your account you will need to contact your new broker to initiate the process. The new broker will submit the transfer out electronically via the Automated Customer Account Transfer Service (ACATS) program. Place Trade does not initiate the transfer out process.


What is the maximum amount allowed for an IRA transfer or rollover?
In most cases, there is no limit on the amount you may transfer or roll over into an IRA. 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 (referred to as a Required Minimum Distribution or RMD) from your IRA each year. This should be taken into account in planning your rollover.

Limits do apply to multiple rollover transactions. You may receive an IRA distribution and roll the funds into another IRA once during a twelve-month period. This rule applies to each IRA separately and begins on the date funds are received.


Can I convert my traditional IRA to a Place Trade Roth IRA?
Yes.


Can I rollover a distribution from my retirement plan through my employer into a Roth IRA?
Yes, it is possible to consider a rollover of funds from your retirement plan directly into a Roth IRA. Any amount rolled over is subject to the same rules for converting a traditional IRA into a Roth IRA. Also, the rollover contribution must meet the rollover requirements that apply to the specific type of retirement plan.


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 Place Trade?
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 PT through a Direct Rollover. To transfer funds via a Direct Rollover please fill out the attached form and mail it in to us. Please note that this form has our clearing firm's name on it because they will be handling the rollover process as our clearing agent.


Can I transfer between Place Trade IRA accounts?
Yes, PT supports internal funds transfers for accounts with a matching Account Type, Account Title, and tax ID. Requests may be submitted on the Funds Transfers page in Account Management >>> Funds Management. For additional information, see Internal Funds Transfer.

 
     
 
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Form 5498

 
   
     
 

 

What is the purpose of Form 5498?
Form 5498 reports your contributions, rollovers and the year-end fair market value.


Where did the amounts come from?
Information on your Form 5498 is provided by your investment firm.


When is this information provided to the IRS?
The reporting deadline for providing this to the IRS for the preceding tax year is May 31.


Why am I getting this form now?
The IRS requires that this form be furnished to you by the trustee of your account by April 30 for the preceding tax year. To access and print your Forms 5498, log in to Account Management with your PT username and password.

If you're using the legacy Account Management version that has menus on the side, from the Report Management menu select Tax Forms.
If you're in Account Management version 2.0 with the menu along the top, select Reports and then select Tax Forms.

Special Note for Executor of Estates
You have the right to request a date of death valuation. This service is available through Principal Trust. Please send a written request with a $40 check (service charge) directly to Principal Trust.

 
     
 
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Form 5498-ESA

 
   
     
 

 

What is the purpose of Form 5498-ESA?
Form 5498-ESA reports contributions, rollovers, and transfers from other Coverdell Education Savings Accounts (ESA).


Where did the amounts come from?
Information for your Form 5498-ESA came from information provided by your investment firm.


When is this information provided to the IRS?
The reporting deadline for providing this information to the IRS is May 31 for the preceding tax year.


Why am I getting this form now?
The IRS requires that this form be furnished to you by the trustee of your account for the preceding tax year by April 30. To access and print your Forms 5498, log in to Account Management with your PT username and password.

If you’re using the legacy Account Management version that has menus on the side, from the Report Management menu select Tax Forms.
If you’re in Account Management version 2.0 with the menu along the top, select Reports and then select Tax Forms.

Important Note
If the total contributions made to all of your Coverdell ESAs exceed $2,000, you must withdraw the excess (plus earnings) by May 31 to avoid a penalty.

 
     
 
     
 
 
 
 

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Learn more about retirement planning by visiting some of the links below:

Roth IRA

SEP IRA

SIMPLE IRA

Traditional IRA

Qualified Plans

Rollover IRAs

Find out how Place Trade can help you get the most out of your college planning by visiting some of the links below:


Coverdell ESA

529 College Savings Plans

UGMA/UTMA Accounts