IRA 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:

  • 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.
  • Withdrawals are permitted only in USD.
  • IRA accounts cannot cross-margin stocks or options.
  • IRA accounts cannot borrow currencies.
  • 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 IRA 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

Transfer Methods

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 must 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, while there are no withholding taxes or penalties applied to a Direct Rollover, 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 from trustee/custodian to trustee/custodian, with no distribution of assets to you. ACATs position transfers are available, but the IRA account type and Tax ID must match in order to execute the transfer. Trustee-to-trustee transfers do not have 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 Type Explanation Transfer Method
Traditional A retirement savings plan that allows an individual taxpayer 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 you turn age 70½. Once you reach age 70½, you must withdraw at least a minimum amount – 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.

2016 IRA distribution requests will not be accepted or processed after 11:59PM, Tuesday December 27, 2016. All request must be entered before this time and date to be honored as a 2016 distribution.
Contribution
Rollover
Direct Rollover
Trustee-to-Trustee
IRA Conversion
Traditional Rollover A traditional IRA account that receives assets directly from an employer-sponsored plan such as a 401(k) or pension plan within 60 days of distribution from the plan. As long as no other assets are contributed to the Traditional Rollover IRA, the monies may be rolled over into a new employer's plan. A traditional rollover IRA is commonly used if you are changing jobs or retiring. Contribution
Rollover
Trustee-to-Trustee
IRA Conversion
Traditional Inherited An IRA 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
Roth A retirement savings plan that allows an individual taxpayer 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
IRA Recharacterization
Roth Inherited An IRA 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
Simplified Employee Pension (SEP) Inherited An IRA account you may set up as the beneficiary of a SEP 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

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 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 a six-month extension period (whether or not the return is extended). The deadline to recharacterize a 2012 Roth conversion is October 15, 2013. 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).


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.

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

IRS Circular 230 Notice: 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.