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Traditional IRA Features


Tax Deductibility

In a traditional IRA, eligible investors may deduct either some or all of their yearly allowable IRA contributions from their taxes. If you are not an active participant in an employer sponsored plan, such as a 401(k), your contributions are fully tax-deductible regardless of your income. If you are part of an employer-sponsored plan, adjusted gross income (AGI) may limit your tax-deductibility. Please see the accompanying chart on income limits to determine the amount of limitation based on your AGI.

Even if you cannot make deductible contributions you may still wish to make contributions to enjoy tax-deferred earnings on your investments. If you make a non-deductible IRA contribution, be sure to report the amount on IRS Form 8606 and file it with your Form 1040 tax return. Failure to file Form 8606 may cause you to incur a penalty.


Eligible investors may contribute up to $5,500 or 100% of their taxable compensation, whichever is less, to their IRA each year. Additionally, Individuals age 50 and older may make catch-up contributions of $1,000 per year.

Spousal Considerations

If you are married and your spouse either earns no income, or elects to be treated as having no taxable income for the year, you may make contributions to a separate IRA under your spouse's name. You may contribute up to $5,500 to your spouse's IRA in addition to the $5,500 you may contribute to your own IRA. Contributions to your IRA and your spouse's IRA may not exceed 100% of compensation or $11,000, whichever is less. If either you or your spouse are active participants in an employer-sponsored retirement program, and you file a joint tax return, your contribution's tax-deductibility will be limited by your adjusted growth income. Please see the accompanying chart on income limits to determine the amount of limitation based on your adjusted gross incomes.

Time of Contributions

You may make Traditional IRA contributions at any time up to and including the due date for filing your tax return, not including extensions.


To be eligible for a traditional IRA you must be younger than age 70½, and you must have taxable compensation. If you are over age 70½ but your spouse is under age 70½, a spousal contribution can still be made to your spouse's IRA.

Contributing to a Saturna IRA

All contributions to your Saturna IRA must be made in cash. Securities or other assets cannot be contributed to an IRA, but may be converted to cash and then contributed. No part of your contribution may be invested in life insurance contracts or mixed with other property.


Age of Withdrawal

Upon reaching age 59½ you may withdraw money from your Traditional IRA without penalty. You must begin to have your Traditional IRA distributed no later than April 1st of the year following the year in which you reach age 70½.

Please use Saturna's IRA Distribution Form to make withdrawals from your IRA account.

Method of Distribution

You have several choices for payment of distributions from your IRA. You may change the method of distribution after payments have begun, so long as the minimum distribution requirements are satisfied.

  • A lump sum payment of your entire account.
  • Monthly, quarterly or annual payments for a period not exceeding your life expectancy or the combined life expectancy of you and your spouse or designated beneficiary.
  • A lump sum payment of part of your account, with the balance either to be paid in installments or used to purchase an Individual Retirement Annuity.
  • In the form of an Individual Retirement Annuity. You may request that the balance of your account be used to purchase a single-premium annuity contract which qualifies as an Individual Retirement Annuity.

If you don't request a method of payment before the end of the taxable year in which you reach age 70½, we will make a lump-sum payment. Installment payment amounts are determined by dividing your IRA balance at the beginning of each year by the number of installments chosen less the number of installments already paid.

Tax on Withdrawals

You must pay income tax at your current tax rate on withdrawals of:

  • Tax-deductible contributions
  • Earnings on those contributions

Unless you elect in writing not to have federal (and possibly state) income taxes withheld by completing a Form W-4P and returning it to Saturna, the IRS requires Saturna to withhold 10% of any Traditional IRA distributions which total over $200 in a calendar year. Distributions from an IRA are not eligible for the special lump sum tax provision that applies to qualified retirement plans.¹

Early Withdrawals: Exemptions and Penalties

The right to withdraw money from a Traditional IRA before age 59½ is restricted. In all early withdrawals, you must add the amount of the early withdrawal to your gross income.

Penalties on early withdrawals:
You must pay a 10% federal penalty tax in addition to your ordinary income tax on the early withdrawal. You must file the IRS form 5329 (Return for Individual Retirement Savings Arrangement).

Exemptions from Penalties:
There are situations in which early withdrawal penalties do not apply. Ordinary income tax on the early withdrawal, however, will still apply. Exemptions from penalties for early withdrawal are the same for Roth and Traditional IRAs with a few exeptions. Please see the List of Exemptions.

Required Minimum Distributions

You must begin receiving the assets in your regular IRA no later than April 1 following the year in which you reach age 70½. The minimum amount that must be distributed each year is found by dividing the balance in your IRA on the last day of the prior year by your life expectancy, the joint life expectancy of you and your beneficiary, or the specified payments term, whichever is applicable. Saturna can help compute the minimum distribution requirement. A federal tax penalty may be imposed against you if the required minimum distribution is not made for the year you reach 70½ and for each year thereafter. The penalty is equal to 50% of the amount which the actual distribution is less than the required minimum.


¹ Non-deductible contributions made to your Traditional IRA are withdrawn on a pro-rated basis. The only tax due on these contributions will be on their earnings. If you have made non-deductible contributions to your IRA, a portion of distributions from your IRA may be exempt from tax. Each distribution from your IRA will consist of a non-taxable portion (the return of non-deductible contributions) and taxable portion (the return of deductible contributions and account earnings). The amount of any distribution excludable from income is the portion that bears the same ratio to the total distribution that your aggregate non-deductible contributions bear to the balance at the end of the year (calculated after adding back distributions during the year) of your IRA. For this purpose, all of your IRAs are treated as a single IRA. Furthermore, all distributions from an IRA during a taxable year are to be treated as one distribution. The aggregate amount of distributions excludable from income for all years is not to exceed the aggregated non-deductible contributions.