Trade Futures in an IRA
Trade Commodities in an Individual Retirement Account
While we would never advocate a large percentage allocation of your retirement funds to commodity trading via self-directed, full-service or even managed futures accounts; there are definite benefits to trading funds earmarked for commodities in a retirement account.
The most prominent example being tax deferred or tax free growth depending on the type of qualified Independent Retirement Account (IRA). In theory, trading accounts within the shelter of a tax friendly IRA have the potential to grow at much more rapid speeds relative to those in a non-qualified account (outside of the IRA umbrella).
However, it is important to note that the advantages of an IRA enjoyed by profitable traders becomes a burden for those that are less fortunate in the markets. Unlike losses in a non- qualified account, IRA losses are not tax deductible. Additionally, there may be considerable fees associated with trading futures and options in an IRA which can exaggerate trading losses. The custodian we work with offers extremely competitive custodian fees...please contact us for details.
Which Brokerage Firms Allow Futures and Options Trading in an IRA?
DeCarley Trading offers traders the ability to speculate on commodity options and futures within a tax sheltered retirement account. However, not all brokerage firms are capable or willing to enable such a trading arrangement. For instance, due to risk management concerns, many of the popular discount brokerages or broker-dealers (those dealing with stock and futures clients) don't give clients the option to trade futures or options on futures within a retirement account. Additionally, those discount firms that do accept IRA accounts might enforce stricter day-trading margins and or risk management techniques such as forced liquidation.
Types of IRA's that can be Traded in Options and Futures
Traditional IRA - Annual contributions may be fully or partially deductible and earnings are tax-deferred; there are income restrictions.
Roth IRA - Annual contributions are not deductible, but withdrawals can be made at any age, tax-free of withdrawal.
Rollover IRA - Allows retirement funds from another IRA or from an employer-sponsored plan such as a 401(k) to remain tax-deferred until the time of withdrawal.
SEP IRA - Small business retirement plan in which the business contributes the same percentage of compensation for all eligible employees.
SIMPLE IRA - Small business retirement plan in which employees are able to defer part of their salary on a tax-advantaged basis, as well as optional employer contributions.
How to Trade Commodities in an IRA
In order to allocate retirement funds to trading the options and futures markets it is required that you open an account with a custodian firm that allows self-directed retirement accounts to be distribute to the commodity markets. There are only a handful of firms capable of such a service.
Once a self-directed IRA custodian is chosen, you must complete an application to open an account with your commodity broker of choice as well as an application with the custodian. Upon completion of both applications, they should both be mailed to the custodian for processing.
Here are a few custodians that we commonly do business with but you are free to shop around, as we are willing to work with any reputable firm. In your search for a custodian, there are a few key concerns that you should focus on: the percentage of your funds that can be applied to your trading account and the fee structure. Some firms limit the percentage of funds that can be forwarded to your futures trading account; clearly, if this is the case you would want to strongly reconsider using them as your custodian. Likewise, you want a firm that is capable of offering competitive fees and efficient service.
AdvantaIRA Trust, LLC
Sterling Trust CompanyP.O. Box 2526Waco Texas 76702-25261-800-955-3434 - Option 2www.SterlingTrustCompany.com
Millennium Trust Company820 Jorie Blvd. Suite 420Oak Brook IL 605231-800-932-0053www.mtrustcompany.com