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.

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.

Contribution limits are based on your Modified Adjusted Gross Income (MAGI). Generally, individual annual contributions are limited to 100% of earned income, up to $6,500 ($7,500 if age 50 and older) for tax year 2023, and up to $7,000 ($8,000 if age 50 and older) for tax year 2024. Spousal Contributions are allowed if married and filing jointly, and are generally limited to 100% of earned income, up to $6,500 ($7,500 if age 50 and older) for tax year 2023, and up to $7,000 ($8,000 if age 50 and older) for tax year 2024.

To be eligible to make the maximum contribution to a Roth IRA, your Modified Adjusted Gross Income (MAGI) must fall within a certain range.

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

Contributions to a Roth 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 have earned income, you may not contribute to a Roth IRA; however if you previously established a Roth IRA while one of you had earned income, you may continue to hold your Roth IRA at Harbor Funds without making additional contributions.

Contributions for a year must be made by the due date (generally April 15th) for an individual's income tax return for that tax year (not including extensions).

No, there are no age restrictions on making Roth IRA contributions.

Yes, as long as the aggregate contributions do not exceed annual IRA contribution limits for the applicable tax year of the contribution.

No, you may make the catch up contribution at any time during the calendar year in which you reach age 50.

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.

No. Roth IRA contributions are not tax deductible.

Contributions are reported on Form 5498. However, the 5498 forms are not sent out until May 31st because shareholders have until the tax due date, generally April 15, to make a contribution to their IRA accounts. You are not required to attach Form 5498 to your Form 1040.

No, the RMD rules applicable to a Traditional IRA do not apply to a Roth IRA.

A distribution from a Roth IRA is considered a qualified distribution (with earnings that are tax- and penalty-free) if it is paid after the Roth IRA owner reaches age 59½, or due to disability, death, or for a first-time home purchase, and it is paid at least five tax-years after the shareholder establishes a Roth IRA.

If you contributed to a Roth IRA but were not eligible to make all or a portion of the contribution because your MAGI is too high, you must remove the excess contribution using the Harbor IRA Distribution Request form. To avoid IRS penalty, you must remove the excess contribution and the net income attributable (NIA) before the tax return due date, plus any extensions, for the year of the contribution.

An IRA conversion is a movement of all or a portion of assets from a Traditional or SEP IRA into a Roth IRA. A conversion is a taxable event. If you converted assets from your Traditional IRA to a Roth IRA you must complete and file Form 8606 (Nondeductible IRAs) with your Federal tax return.

Eligibility for a Roth conversion was greatly simplified when Congress eliminated the $100,000 income limitation as of 2010. There are still some important requirements and rules concerning conversion eligibility, however. The general rule is that if you're able to take a distribution that is eligible for a rollover, you are also permitted to do a conversion.

For information that is specific to your situation, please consult your tax adviser.

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.

A contribution recharacterization is the "reversal" of a current year regular contribution (plus earnings) from one type of IRA to another type of IRA. A contribution may be recharacterized and considered a current-year contribution to a different type of IRA if the recharacterization is completed by the applicable deadline. 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 is also considered a recharacterization but is no longer available after October 15, 2018.

No. Effective January 1, 2018, pursuant to the Tax Cuts and Jobs Act (Pub. L. No. 115-97), a conversion from a traditional IRA, SEP or SIMPLE to a Roth IRA cannot be recharacterized. The new law also prohibits recharacterizing amounts rolled over to a Roth IRA from other retirement plans, such as 401(k) or 403(b) plans.

A Roth IRA conversion made in 2017 may be recharacterized as a contribution to a Traditional IRA if the recharacterization is made by October 15, 2018. A Roth IRA conversion made on or after January 1, 2018, cannot be recharacterized. For details, see "Recharacterizations" in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

Net Income Attributable is a concept in the Internal Revenue Code for calculating the net gain or loss generated by an excess IRA contribution.

When an excess IRA contribution is removed, not only does the excess contribution (or conversion) amount itself need to be removed, but also any income that was generated by that contribution while it was in that account. If an IRA decreased in value while it contained an excess contribution, the loss that can be attributed to the excess contribution does not need to be removed from the account.

Generally, individuals determine NIA by allocating to the contribution a pro rata portion of the net income (or loss) on the assets in the IRA during the period the IRA held the contribution. A negative NIA is permitted under this calculation for removal of excess contributions or recharacterizations.

The formula for calculating NIA is shown below:

If you would like to estimate the NIA for your IRA contribution, please click on the link below and complete the Net Attributable Form as accurately as possible.

The IRS provides the formula for calculating NIA in Treasury Regulation (Treas. Reg.) 1.408-11 (26 CFR 1.408-11)

Clarifications to NIA Method

In addition to considering transfers and recharacterizations in the NIA formula, the regulations make other clarifications as follows.

• If an IRA is not valued on a daily basis, the fair market value at the beginning of the computation period is deemed to be the most recent, regularly determined, fair market value of the asset.
• If an individual owns more than one IRA the NIA calculation is performed on the IRA containing the excess contribution being returned, and the distribution must be made from that IRA.
• If an IRA has received more than one regular contribution for a particular tax year, the last regular contribution (not transfer or rollover) made to the IRA is deemed to be the contribution that is distributed, and a single computation period applies.
• NIA is based on the overall dollar value of the IRA, not on the return of specific assets.

For further questions on Net Income Attributable, please contact a Shareholder Services Representative at 800-422-1050, Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time.

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.

Harbor Capital and its associates do not provide legal or tax advice.

Any tax-related discussion contained in this material, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or tax professional regarding any legal or tax issues raised in this material.

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