IRA Account Information

IRA Account Types

US citizens living anywhere in the world and US resident aliens may open cash or margin Individual Retirement Accounts (IRAs)*.

IRA margin accounts allow trading so the account can be fully invested as well as the ability to trade multiple currencies and multiple currency products, but are subject to the following limitations:

  • No cash borrowing (i.e. cannot 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.
  • Withdrawals are permitted only in USD.
  • No stock or option cross-margining.
  • No currency borrowing.
  • Futures trading in an IRA margin account is subject to substantially higher margin requirements than in a non-IRA margin account. Margin rates in an IRA margin account may meet or exceed three times the overnight futures margin requirement imposed in a non-IRA margin account.

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

For IRA FAQs, click here.

*Residents of Canada may not open Individual Retirement Accounts.

IRA Customer Types

When you open an Individual Retirement Account with Interactive Brokers, you must select a an IRA customer type. The following IRA customer types are available:

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

Funding Your IRA

There are several ways to fund an IRA account.

  • Contribution - The dollar amount of assets you are contributing to an Individual Retirement Account. This amount may be subject to certain limits imposed by the Internal Revenue Service (IRS).Contributions are reported to the IRS on Form 5498.
  • 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 must be reported to the IRS on Form 5498. 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, while there are no withholding taxes or penalties applied to a Direct Rollover, Direct Rollovers are reported to the IRS on Form 5498.
  • Trustee-to-Trustee Transfer - A transfer of funds from an Individual Retirement Account held with another trustee/custodian to an IB-IRA account, where the assets are transferred directly from trustee/custodian to trustee/custodian, with no distribution of assets to you. ACATs position transfers are available, but the account type and Tax ID must match in order to execute the transfer. Trustee-to-trustee transfers are not reported to the IRS.

All of these IRA funding methods are cash transactions, and Trustee-to-Trustee transfers can also use an ACATS position transfer in Account Management.

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 funding methods.

IRA Type Explanation Funding Method
Traditional A retirement savings plan that allows an individual to contribute earnings until they are withdrawn. Contributions are subject to annual limits depending on the age of the account owner and may or may not be deductible depending on the individual's circumstances. Earnings accumulate tax deferred until distributed to you at which time the earnings are subject to tax upon withdrawal. A spouse may contribute to a separate account subject to the same limits. Withdrawals made prior to age 59½ are subject to a 10% penalty unless certain special circumstances apply. Distributions must begin by the account owner's required beginning date (RBD), which is April 1 following the year that the account owner reaches age 70½. Once the account owner reaches age 70½, he or she must withdraw at least a minimum amount called an annual Required Minimum Distribution (RMD). If an account owner fails to withdraw the full amount of the RMD annually, or fails to withdraw the RMD, there is a 50% tax penalty that may be imposed by the IRS on the amount not withdrawn. Contribution
Rollover
Direct Rollover
Trustee-to-Trustee Transfer
IRA Recharacterization
Traditional Rollover A traditional IRA account that receives assets directly from an IRS-approved retirement plan such as a 401(k) or pension plan within 60 days of distribution from the plan. A traditional rollover IRA is commonly used if you are changing jobs or retiring. Contribution
Rollover
Trustee-to-Trustee Transfer
IRA Recharacterization
Traditional Inherited An account you may set up as the beneficiary of a Traditional IRA you inherited from a spouse or other IRA account owner who has died, to receive a transfer of beneficiary IRA assets. Trustee-to-Trustee Transfer
Roth A retirement savings plan that allows an individual to contribute earnings, subject to certain income limits. Earnings accumulate tax-free and contributions are nondeductible. Unlike Traditional IRAs, a Roth IRA account owner may continue to contribute after age 70½ if they have earned income. Withdrawals prior to age 59½ are subject to a 10% penalty unless special circumstances apply. There are no age requirements when an account owner must begin taking distributions. Contributions are subject to annual limits depending on the age of the account owner. Contribution
Rollover
Trustee-to-Trustee Transfer
IRA Conversion
Roth Inherited An account you may set up as the beneficiary of a Roth IRA you inherited from a spouse or other IRA account owner who has died, to receive a transfer of beneficiary IRA assets. Trustee-to-Trustee Transfer
Simplified Employee Pension (SEP) A written plan that allows an employer to make contributions toward their own retirement and their employees' retirement without getting involved in a more complex qualified plan. Under a SEP, the employer makes contributions to a traditional individual retirement arrangement (called a SEP IRA) set up by or for each eligible employee. A SEP IRA is owned and controlled by the employee, and the employer makes contributions to the financial institution where the SEP IRA is maintained. The employee may also make annual contributions subject to the limits for traditional IRAs. Contribution
Rollover
Trustee-to-Trustee Transfer
IRA Recharacterization

Conversions and Recharacterizations


IRA Conversion

When you convert Traditional IRA assets into a Roth IRA, the assets are distributed from your Traditional IRA and transferred into your Roth IRA. The distribution out of your Traditional IRA is reported on Form 1099-R and the contribution made to your Roth IRA is reported on Form 5498. Both events are reported to the IRA owner and the IRS.

You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. However, a part or all of the distribution from your traditional IRA may be included in gross income and subjected to ordinary income tax. You must roll over into the Roth IRA the same property you received from the traditional IRA. You can roll over part of the withdrawal into a Roth IRA and keep the rest of it. The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions) and may be subject to the 10% additional tax on early distributions


IRA Recharacterization

An IRA recharacterization allows you to undo or reverse a rollover or conversion to a Roth IRA. In a recharacterization, you tell the trustee of the financial institution holding your Roth IRA to transfer the amount to a traditional IRA (in a trustee-to-trustee or within the same trustee). If you do this by the due date for your tax return (including extensions), you can treat the contribution as made to the traditional IRA for that year, effectively ignoring the Roth IRA contribution.

For details, see "Recharacterizations" in IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).


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.

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

Contribution Limits

Contribution Year Roth, Traditional, & Direct Rollover Contribution Limit
(Under Age 50)
Roth, Traditional, & Direct Rollover Contribution Limit
(Age 50 and over)
Simplified Employee Pension (SEP- IRA)
Filing Deadline Excluding Extensions
4/15 of following year
Filing Deadline Excluding Extensions
4/15 of following year
Employer Filing Deadline Including Extensions
4/15 of following year or as extended 10/15
2015 5,500 6,500 Lesser of 25% eligible Comp. or $53,000
2016 5,500 6,500 Lesser of 25% eligible Comp. or $53,000
Disclosure

These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.