IRA FAQs

• What is an IRA?
• What types of IRA Accounts are available?
• Are there any fees for opening an Interactive Brokers IRA?
• What is the minimum deposit required to open an Interactive Brokers IRA Account?
• What is a Traditional IRA?
• How do I know if I am eligible to make a contribution?
• How much can I contribute?
• When may I withdraw funds from my IRA?
• How do I take a distribution?
• What is an IRA Rollover?
• Can I rollover an existing IRA with another broker to Interactive Brokers?
• What is a Direct IRA Rollover?
• How do I move my current employer sponsored retirement plan to an Interactive Brokers IRA?
• What is a Plan Sponsor?
• Is there a way to avoid the 20% Withholding Tax on my Retirement Plan Distribution?
• What is a Conduit IRA?
• How do I transfer my existing IRA to Interactive Brokers?
• Is there a Maximum IRA Transfer or Rollover?
• Can I contribute to an IRA if I already have a retirement plan through my employer?
• What is a Roth IRA?
• What is a “catch up” IRA contribution, and am I eligible?
• Who is eligible to make a contribution to a Roth IRA?
• Can I still contribute to a Roth IRA if I’m older than 70 1/2 and I’m still working?
• Can I deduct my Roth IRA contributions?
• When may I withdraw my Roth IRA earnings income tax free?
• Can I convert my Traditional IRA into a Roth IRA?
• Can I rollover a distribution from my retirement plan through my employer into a Roth IRA?
• When am I required to begin taking distributions from my Roth IRA?
• Can I have both Traditional and a Roth IRA?
• What is a 403(B) Tax Sheltered Annuity?
• Can I rollover a 457 deferred compensation plan through my employer into an IRA when I leave my employer?
• Can I transfer my current pension plan to an IRA at Interactive Brokers?
• What is a mandatory distribution?
• What is the tax consequence of taking a distribution?
• What are the tax consequences of taking an early withdrawal?
• Are IRA accounts subject to any restrictions?
• How to open an IRA account?
• What can I invest in?
• What commissions will I pay?
• Who is the Custodian?
• What are the types of deposits allowed?
• Can I transfer between Interactive Brokers IRA accounts?
• What type of Installment Payouts are allowed?

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 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 interest accumulates tax-deferred until the funds are withdrawn.

What types of IRAs are available?
IB offers a wide range of IRAs, including Traditional, Roth, SEP and Rollover IRAs. 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 fees for opening an Interactive Brokers IRA?
No. Although IB does not charge an annual custodial fee, or an account termination fee, there is a monthly commission minimum of $10.00 or USD equivalent.

What is the Minimum Deposit Required to open an Interactive Brokers IRA account?
The minimum deposit required is US $5,000. (This is the minimum deposit required for a Stock Only Cash Account, which is how your IB IRA will be structured.)

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.

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?
Review the IRA Contribution Limits page.

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 - 72(t)
• To pay for health insurance premiums if unemployed more than 12 consecutive weeks
• Medical Expenses in excess of 7.5% of your AGI (Adjusted Gross Income)
• Death
• IRS Levy

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.

What is an IRA Rollover?
A rollover requires a distribution from an IRA or qualified plan, which is then rolled over into an 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 Rollover an existing IRA with another broker to IB?
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).

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

What is a Plan Sponsor?
A Plan Sponsor is an employer who sets up a qualified retirement plan such as a 401(k) plan.

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.

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.

How do I transfer my existing IRA to Interactive Brokers?
Interactive Brokers Automated Customer Account Transfer System (ACATS) 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 ACAT program. The NSCC's ACAT system enables your broker to enter, review, and settle account transfers in a fully automated system. Requests for Automated Transfer of Assets must be sent to the receiving broker. Your IB account must be opened and approved before you begin the ACAT.

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. 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.

Is there a maximum IRA transfer or rollover?
In most cases there is no limit on the amount you may transfer or roll over into an IRA because 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 from your IRA each year. This should be taken into account in planning your rollover.

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 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 $3,000. Non-working spouses may also contribute up to $3,000 to a Roth IRA. For individuals age 50+, contributions may be increased by $500. Taxpayers with joint adjusted gross income under $150,000 (under $95,000 for single taxpayers) 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 on Roth IRAs.

To be eligible for conversion, adjusted gross income cannot exceed $100,000 (not counting the income from the conversion). The conversion amount is taxable at ordinary income rates, but the 10% premature distribution penalty tax does not apply.

Holders of existing IRAs must convert to a Roth IRA before transferring to Interactive Brokers.

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 for contribution limits.

Who's 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

• Single filers
  < $95,000 Full contribution
  $95-110,000 Partial contribution
  $110,000 + No contribution
  
  
• Married filing joint
  <$150,000 Full contribution
  150-160,000 Partial contribution
  $160,000 + 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 70 ½ 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.

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)

Can I convert my Traditional IRA to a Roth IRA?
You must perform this conversion before you transfer your IRA to IB. Your Modified Adjusted Gross Income can't exceed $100,000 (single or joint filers) in the year of the conversion.

Can I rollover a distribution from my retirement plan through my employer into a Roth IRA?
No.

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.

Can I have both a Traditional and a Roth IRA?
Yes, you can. But remember that you can only contribute up to $3,000 per year to any combination of Traditional and Roth IRAs that you have. You cannot contribute $3,000 to each. On the other hand, your annual $2,000 contributions to a Coverdell ESA are entirely separate from the $3,000 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 nonprofit organizations. The vast majority of participants are teachers in public schools, colleges and universities.

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 Interactive Brokers?
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 IB through a Direct Rollover.

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 1099R 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 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 sixty (60) days 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 IB home page and select Open an Account for an Individual.

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, futures contracts, and futures options. The IB 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?
IB IRA account holders benefit from the same low commission rates as other IB customers.

Who is the Custodian?
The Delaware Charter Guarantee & Trust Company, doing business as Principal Trust Company, a Company of The Principal Financial Group, will act as the Custodian for all IB IRAs. As Custodian, Principal Trust Company will handle certain functions, including acting as trustee for the retirement plan; maintaining such plans in compliance with applicable federal laws and regulations; maintaining account information, and preparing and filing IRS forms on behalf of Interactive Brokers. Principal Trust Company's address is 1013 Centre Road, Wilmington, Delaware 19805.

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. Click here for instructions on sending funds for IRAs.

Can I transfer between Interactive Brokers IRA accounts?
No.

What type of Installment Payouts are allowed?
IB only allows a lump sum distribution payment which can be made on-line.