Traditional vs. Roth IRAs

You received compensation during the year for personal services you rendered (or earned income if you’re self-employed), subject to certain income limits. If you received taxable alimony, this is considered compensation for IRA purposes if the payments are received under a divorce or separation instrument executed on or before December 31, 2018. Compensation also includes any differential wage payments made to you with respect to service in the uniformed services and any taxable amounts paid to you in the pursuit of graduate or postdoctoral study. Compensation also includes certain amounts paid as scholarships and fellowships. Compensation does not include amounts received as a pension or annuity, amounts received as deferred compensation, amounts derived from or received as earnings or profits from property, such as interest, dividends and rent, or any amount not includable in gross income.

This depends upon your individual situation. A contribution to a traditional IRA may be tax deductible, while a contribution to a Roth IRA isn’t deductible. Also, the benefits of a traditional IRA versus Roth IRA may depend upon a number of other factors, including: your current income tax bracket vs. your expected income tax bracket when you make withdrawals from your IRA, whether you expect to be able to make nontaxable withdrawals from your Roth IRA, how long you expect to leave your contributions in the IRA, and how much you expect the IRA to earn in the meantime.

We suggest you consult with a financial or tax advisor to determine whether you should establish a traditional or Roth IRA or convert any or all of an existing traditional IRA to a Roth IRA. Your tax advisor can also advise you as to the state tax consequences that may affect whether a traditional or Roth IRA is better for you.

You control the investment and reinvestment of contributions to your Dodge & Cox Funds — UMB Bank, n.a. IRA. Investments must be in one or more of the Dodge & Cox Funds. You direct the investment of your IRA by giving your investment instructions to the Transfer Agent for the Fund(s) as described in the Fund prospectus. Since you control the investment of your IRA, you’re responsible for any losses; neither the Funds, the Custodian, nor the Transfer Agent has any responsibility for any loss or diminution in value occasioned by your exercise of investment control. Transactions for your IRA will generally be at the next-determined net asset value per share for shares of the Fund(s) involved after the Transfer Agent receives proper investment instructions from you. You should consult the current prospectus for the Dodge & Cox Funds for additional information.

Before making any investment, carefully read the current prospectus for any Fund you’re considering as an investment for your traditional or Roth IRA. The prospectus will contain information about the Fund’s investment objectives and policies, as well as minimum initial investment requirements and any other charges.

Because you control the selection of investments for your IRA and because mutual fund shares fluctuate in value, the growth in value of your IRA cannot be guaranteed or projected.

The Custodian will report all withdrawals to the Internal Revenue Services (IRS) and the recipient on the appropriate form. For reporting purposes, a direct transfer of assets to a successor custodian or trustee isn’t considered a withdrawal (except for a direct transfer that effects a conversion of a traditional IRA to a Roth IRA, or a recharacterization of a Roth IRA back to a traditional IRA).

The Custodian will report to the IRS the year-end value of your account and the amount of any rollover (including conversions from a traditional IRA to a Roth IRA) or regular contributions made during a calendar year, as well as the tax year for which a contribution is made.

Unless the Custodian receives an indication from you to the contrary, it will treat an amount received as a contribution for the tax year in which it’s received. It’s important that a contribution made between January 1 and before the due date of your federal income tax return for the prior year be clearly designated as such.