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Individual Retirement Account FAQs

  • What are the differences between the types of IRAs TradeKing offers?

    Traditional IRA — An individual retirement arrangement (IRA) which allows investors to deposit income, up to a specific annual maximum toward investments that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to $5,500 ($6,500 for those 50 and over) to their Traditional IRA. Contributions to a Traditional IRA are made with pre-tax dollars and may be tax-deductible depending on the taxpayer's income, tax-filing status, and other factors. There are no annual fees, or maintenance fees in TradeKing's Traditional IRAs. Please review IRS Publication 590 for more information on Traditional IRAs.

    Roth IRA — A Roth IRA is a retirement account in which contributions are not tax deductable (contributions are made with post-tax dollars). Roth IRAs do allow for tax exempt distributions. Typically funds must have been held in the account for a minimum of 5 years and you must be over the age of 59 ½ to make a qualified distribution. There are however exceptions to these rules depending on your specific situation. There are also income requirements which must be met to be eligible for a Roth IRA. If you file individually and earn $120,000 or more, you would not be eligible for a Roth. If filing jointly, those earning $177,000 or more would not be eligible. There are no annual, or maintenance fees in TradeKing's Roth IRAs. Please review IRS Publication 590 for more information on Roth IRAs.

    Rollover IRA — A rollover IRA is a retirement account designed to facilitate the movement of holdings from a Corporate Retirement Plan such as a 401K Plan. Due to recent tax law changes, the Rollover IRA is now interchangeable with a Traditional IRA. Contributions may be tax deductible depending on the client's income level, and the same $5,500 ($6,500 age 50 and over) contribution limit that applies to Traditional and Roth IRAs applies to Rollover accounts as well. There are no annual, or maintenance fees in TradeKing's Rollover IRAs. Please review IRS Publication 590 for more information on performing a rollover.

    SIMPLE IRA — SIMPLE stands for Savings Incentive Match Plans for Employees and it is a type of salary reduction plan that qualifying employers may offer to their employees. Employers that do not offer any other retirement plan and generally have no more than 100 employees can offer SIMPLE IRAs to their employees. Self-employed individuals are also are eligible to establish SIMPLE IRA accounts. SIMPLE IRAs must be maintained on a calendar year basis. For more details about SIMPLE IRAs, please consult IRS Publication 560 and Publication 4334.

    SEP IRA — SEP stands for Simplified Employee Pension and is a type of retirement account that's similar to an Individual Retirement Account (IRA), but for either self-employed individuals or small companies with typically less than 25 employees. Tax-free contributions are made by an employee, or tax-deductible contributions are made by an employer on behalf of an employee. Upon retirement withdrawals are taxed at the retiree's current tax bracket. For more details about SEP IRA's, please consult IRS Publication 560 and Publication 4333.

    Coverdell Education Savings Account (ESA) — A Coverdell Education Savings Account is a tax privileged account designed for saving for education expenses. The beneficiary of the account must be under 18 when the account is established, or be a special needs beneficiary. Annual contributions to Coverdell ESAs are limited to $2000 and those contributions are not tax deductible. Distributions are tax-free as long as they are used to for qualified education expenses and do not exceed the amount of those expenses. Please review IRS Publication 970 for more information pertaining to Coverdell Education Savings Accounts.
  • What are the differences between a Traditional IRA and a Roth IRA?

    Traditional IRA Roth IRA
    Contribution limits Currently $5,500 with a $1000 catch up clause for clients 50 or older as of the contribution year Currently $5,500 with a $1000 catch up clause for clients 50 or older as of the contribution year
    Contribution Age Limit Contributions not allowed as of the year the client reaches 70½. No age limitations on contributions.
    Income Caps for Contributions No income cap to contribute Adjusted Gross Income (AGI) of less than $177,000 if filing jointly or less than $120,000 if filing individually
    Tax consequences for earnings

    Gains grow on a tax-deferred basis. For tax purposes, earnings are added to income for the year distribution is taken Gains grow tax-deferred. Qualified distributions are not taxed, including earnings
    Deductibility Contributions may be deductible, depending on income level and participation in a Corporate Retirement Plan Contributions are not deductible; they are considered to be post-tax contributions
    Distribution Regulations Distributions may be taken at anytime. Distributions before the age of 59½ may be subject to a 10% penalty if taken before that age. Distributions may be taken at anytime. Distributions are tax and penalty-free if qualified. Generally to be qualified, the funds must be held in the account for at least 5 years and meet certain criteria if the client is below 59½. Qualified early distribution criteria include: educational expenses, medical expenses, and the purchase of a first home.
    Required Minimum Distribution Generally must begin taking distributions by April 1st of the year following the year in which you reach age 70½. Roth Account holders are not subject to RMD rules. However, beneficiaries receiving Roth IRA funds are subject to the RMD rules.

    Please review IRS Publication 590 for a complete breakdown of the differences between Traditional and Roth IRAs.

  • How do I contribute to an IRA?

    The easiest way to fund an IRA account is by bank wire or check. When funding by these methods, please be sure to indicate the contribution year on your wire or check so we can properly label your contribution.

    Contributing via ACH is also possible. You can setup an ACH profile online by going to the "Deposit Funds" page under the "Transfer Funds" menu and selecting "Setup ACH Profile" from the choices on the left. After setting up your profile online, you can make contributions anytime you want or setup an automatically recurring contribution. Please visit the "Deposit Funds" page for complete instructions on setting up your IRA with ACH.

    You can also contribute to an IRA by performing a journal of cash from an existing individual or joint TradeKing account. If performing a journal from a Joint Account to an IRA Account, the original Journal Request will need to be notarized and mailed to TradeKing. The journal request form can be found here.

  • Are there any restrictions on the types of trades or investments I can make in an IRA?

    In an IRA you can trade stocks, ETFs, options (based on approval level), mutual funds, and fixed income products such as bonds or CDs. Because industry regulations prohibit IRA accounts from having margin, short selling and selling naked options are not allowed.
  • Can I trade options in an IRA?

    Based on additional approval, you may be able to make up to Level 3 option trades in your IRA. This means that depending on your approval level you can use strategies such as: covered calls, cash-secured puts, long puts and calls, spreads and other multi-leg strategies. Please review our Option Account Agreement and Application to learn more about our requirements for trading options at TradeKing.
  • What fees apply to IRAs?

    TradeKing does not charge an annual fee for maintaining an IRA account. However, the account may be subject to an annual Inactivity Charge. There is also a $50 fee for terminating an IRA or making a full transfer of an IRA out of TradeKing. This termination fee is charged when all funds are removed from the IRA. Performing a full transfer out of TradeKing will result in both a $50 transfer fee and a $50 termination fee. Partial account transfers have a $10 per position charge up to a maximum of $50.
  • How do I add a beneficiary to my account?

    To add or change a beneficiary to your IRA account, please complete the IRA Beneficiary Designation form. The completed form can be emailed to, faxed to 866.699.0563, uploaded in the forms section of the website while logged into your account, or mailed to us at: TradeKing PO BOX 49050 Charlotte, NC 28277-3432.
  • How much can I contribute to my IRA?

    The IRA contribution limit for 2015 and 2016 is $5,500 or $6,500 if you’re age 50 or older at the end of the calendar year. There may be limitations to the amount you can contribute based on your filing status and income. Any specific questions regarding your filing status or the potential limitations should be directed towards a tax professional as TradeKing does not provide tax advice. Additional information about IRA contribution limits can be found by clicking here.