Tax Deductibility

In a Traditional IRA, eligible investors may deduct either some or all of their yearly allowable IRA contribution from their taxable income. 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, your modified adjusted gross income (AGI) may limit your tax-deductibility. Please see the accompanying chart on income limits (below) to determine the amount of limitation based on your AGI.

Maximum income limits (AGI) for deductible contributions to a Traditional IRA while participating in an employer-sponsored plan.
 Full deductibility up to:Deductibility phased out up to:
Single Filers
Joint Filers

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 file IRS Form 8606 with your Form 1040 tax return. Form 8606 accounts for the amount that is to be non-deductible. Failure to file Form 8606 may cause you to incur a penalty.

Contribution Limits

Eligible investors may contribute up to $7,000 for 2024, or 100% of their taxable compensation, whichever is less, to their IRA each 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 Kay Bailey Hutchison Spousal IRA under your spouse's name. You may contribute up to $7,000 to your spouse's IRA in addition to the $7,000 you may contribute to your own IRA for 2024. Contributions to your IRA and your spouse's IRA may not exceed 100% of compensation or $14,000 for 2024, 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 gross income. Please see the accompanying chart on income limits (above) to determine the amount of limitation based on your adjusted gross income.

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. Exceptions apply to certain rollover contributions.

Time of Contributions

You may make Traditional IRA contributions at any time up to and including the due date for filing your tax return (usually April 15), not including extensions. Note that unless you specify otherwise, we will code contributions for the year in which we received them.


For 2019 and earlier, 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.

For 2020 forward, there is no age limit on making regular contributions to traditional IRAs, however, having taxable compensation remains a requirement.


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

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.

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 (for 2019 and earlier) or age 72 (for 2020 and later – if you reach age 70½ in 2020 or later you must take your first RMD by April 1 of the year after you reach 72). 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. If a distribution is less than the required minimum distribution (RMD), the penalty is equal to 50% of the difference between the RMD and the actual distribution.

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.

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 an IRA Distribution Form and returning it to Saturna, the IRS requires Saturna to withhold 10% of any Traditional IRA distributions that 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 early withdrawals. You must file the IRS Form 5329 (Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts).

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 exceptions.

Early withdrawals are exempt from the 10% penalty in the following situations:

  • Death or permanent disability
  • To pay medical expenses that exceed 7.5% of your adjusted gross income (AGI)
  • To pay health insurance premiums for unemployed persons of their families
  • To pay qualified higher-education expenses for you, your spouse, or your children or grandchildren
    • Qualified higher-education expenses include: tuition, fees, books, supplies and equipment required for the enrollee
  • To buy, build, or rebuild a first home (up to a total of $10,000) that is the principal residence of you, your spouse, your children, grandchildren or ancestor

¹ Non-deductible contributions made to your Traditional IRA are withdrawn on a prorated basis. The only tax due on these contributions will be on their earnings. If you have made nondeductible 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 nontaxable portion (the return of nondeductible 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 nondeductible 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 aggregate nondeductible contributions.