US resident customers may open cash or margin Individual Retirement Accounts (IRAs).

IRA margin accounts are afforded all the benefits of a margin account, such as the ability to day trade and the ability to trade multiple currencies and multiple currency products, but are subject to the following limitations:

• IRA accounts cannot borrow cash (i.e. have a debit balance or short stocks).
• IRA accounts may be opened in any base currency, but when trading in a non-base currency product a currency trade must be executed first as you cannot borrow currencies.
• IRA accounts can only cross-margin single stock futures, not stocks and options.
• IRA accounts cannot borrow currencies.

Customers are advised to consult a tax specialist for further details on IRA rules and regulations.

When you open an IRA account with Interactive Brokers, you must select a type of IRA account. The following IRA types are available:

• Traditional
• Traditional Rollover
• Traditional Inherited
• Roth
• Roth Inherited
• Simplified Employee Pension (SEP)
• Simplified Employee Pension (SEP) Inherited

Transfer methods describe the way an IB IRA account is funded. All of the following transfer methods are cash transactions, and Trustee-to-Trustee transfers can also use an ACATS position transfer in Account Management.

• Contribution - The dollar amount of assets you are contributing to an IRA account, subject to certain limits based upon your age and the year of the contribution. Contributions are reported to the Internal Revenue Service (IRS).
• Rollover - A transfer of funds from an IRA account with another trustee/custodian, within 60 days following a distribution, to an IB-IRA account. Rollovers are required to be reported to the IRS. IRA account types must be the same in order to rollover assets, for example if the originating account is a Roth IRA, your IB account must also be a Roth IRA.
• Direct Rollover - A transfer of funds from a qualified plan (pension, 401(k) or other qualified retirement plan) with an employer to an IB Traditional IRA account. In a Direct Rollover, the trustee/custodian of your employer qualified plan (401(k) or pension) transfers your retirement assets directly to IB. In general, no withholding tax or penalties apply to a Direct Rollover, however Direct Rollovers are reported to the IRS.
• Trustee-to-Trustee - A transfer of funds from an IRA account held with another trustee/custodian to an IB-IRA account, where the assets are transferred directly trustee/custodian to trustee/custodian, with no distribution of assets to you. ACATs position transfers are available, however the IRA account type and Tax ID must match in order to execute the transfer. Trustee-to-trustee transfers are not required to be reported to the IRS.

Refer to the Tax Reporting page on our website for information on IRS forms you will receive when transferring retirement plan assets.

The following table lists all available IRA types and applicable transfer methods.

IRA Conversion

An IRA conversion is a transfer of Traditional, Traditional Rollover or SEP IRA assets to a Roth IRA with the same custodian or as a trustee-to-trustee transfer or rollover. A conversion is subject to Form 1099-R reporting for the distribution from the non-Roth and Form 5498 for the contribution to the Roth IRA.

Eligibility requirements

You are eligible to convert to a Roth IRA if your modified adjusted gross income (MAGI) does not exceed $100,000 (not including the IRA conversion amount) in the year you convert. This rule applies to both single and joint tax filers. Married individuals filing separate tax returns are not eligible to convert to a Roth IRA unless they have lived apart from their spouse for the entire tax year.

2010 changes

If you convert in 2010, neither the MAGI limit nor the requirement that married filing separately spouses live apart for the year will apply. Generally, when you convert to a Roth IRA, you are required to pay taxes on any taxable converted amount including deductible contributions and any investment earnings. If you convert in 2010, the income taxes may be spread over 2011 and 2012, with 50% of the taxes due being paid in each of those years. Furthermore, if you convert your Traditional IRA to a Roth IRA, the taxable portion of your Traditional IRA will not be subject to a 10% penalty tax regardless of your age at the time of the conversion unless the full amount of the distribution is not converted (for example, if you elect to withhold taxes and the amount withheld is not replaced.)

The deadline to convert to a Roth IRA is December 31 of the year you choose to convert.

IRA Recharacterization

An IRA recharacterization is a transfer of converted Roth IRA assets back to a new or existing Traditional IRA account. Roth IRA converted amounts from a SEP IRA may also be recharacterized back to a SEP IRA account. IRS reporting is required for the distribution from the Roth IRA and the contribution to the non-Roth IRA.

Timing

Election to recharacterize must be made by the tax return due date, plus the maximum six-month extension period (whether or not the return is actually extended). The deadline to recharacterize a 2010 Roth conversion is October 15, 2010. An IRA recharacterization is a transfer back to a new or existing Traditional IRA of converted Roth assets. Roth IRA converted amounts from a SEP IRA may also be recharacterized back to a SEP. IRS reporting is required for the distribution from the Roth and the contribution to the non-Roth IRA. Timing Election to recharacterize must be made by the tax return due date, plus the maximum six-month extension period (whether or not the return is actually extended).

The deadline to recharacterize a 2010 Roth conversion is October 15, 2010.

Reconversion

Reconversion is defined as a second conversion (following a Recharacterization) from a non-Roth IRA to a Roth IRA. Taxpayer has already made a first conversion from a non-Roth to a Roth IRA and then recharacterized the conversion amount (including net earnings) back to a non-Roth IRA. You may not convert, recharacterize and then reconvert in the same tax year. IRS reporting is required.

A taxpayer cannot reconvert back to a Roth IRA until the later of:

1. January 1 of the tax year following the year of the first conversion, or
2. 30 days after the recharacterization to a non-Roth IRA

If the taxpayer makes a reconversion within the same tax year or before the 30 day waiting period, the reconversion is disregarded and the taxpayer must use the value of the non-Roth IRA at the time of the first conversion to calculate the taxable income for the year.

Additional Information

• If you are age 70½ or older and you have not taken a Required Minimum Distribution (RMD) from your IRA, you must do so prior to converting to a Roth IRA.
• For IRA Conversions from an IB traditional IRA (or IRA rollover) account, you first must open an IB Roth IRA if you do not already have one.
• Your existing traditional IRA account will be closed upon completion of a full conversion transfer.
• Please note that transfers of securities positions from a Traditional IRA to a Roth IRA will only be accepted between accounts with matching names and taxpayer identification numbers.
• You cannot revoke or modify your election to Recharacterize after the election has been made.
• An election to Recharacterize must be made by the federal tax return due date, plus the maximum six-month extension period, for example, October 15, 2011.

Consult your tax advisor before you decide to convert to a Roth IRA.