Forex
Trading Roth IRA
You can either set
up a forex IRA account using a Traditional
IRA or a Roth IRA. A Traditional Individual Retirement Account (IRA)
allows the investor to make contributions with pretax dollars and the
account balance compounds tax-free until the funds are withdrawn (usually
at retirement). The Roth IRA, on the other hand, allows contributions
to be made with after-tax dollars. The account balance also compounds
tax-free, but the funds can be withdrawn tax free if the account is
at least 5 years old and the account owner is over 59 1/2.
New forex traders
usually ask us how much can be contributed to an IRA. The maximum contributions
an individual can make to a Traditional IRA is 100% of earned income
up to $5,000 ($6,000 for those older than 50). Likewise, for a Roth
IRA, the maximum contribution is 100% of earned income up to $5,000
(tax year 2009). The contribution limits for both types IRA's are reduced
by any contributions made to either type. If you want to be able to
contribute more than $5,000 to a new IRA account, go back to our main
forex trading IRA page and read
the section on setting up a SEP IRA to trade currencies.
To be eligible to
make contributions to a Roth IRA, a married forex trader for the year 2009, who files jointly must have a modified adjusted gross income (MAGI) below $166,000. If the trader's MAGI is between $166,000 and $176,000, then they can contribute some amount less than their full limit. If the trader's income exceeds $176,000, they are not eligible to contribute to a Roth IRA for 2009.
For single FX traders, the Roth IRA phase-out limit is lower: $105,000 to $120,000 for 2009.
If you are setting
up an Individual Retirement Account to trade currencies, please keep
in mind that by law, there are penalties for early withdrawals. Both
the Traditional IRA and the Roth IRA carry a 10% penalty for withdrawals
before age 59 1/2 (for exceptions to early withdrawals, please consult
your tax advisor or the IRS).
Whereas the Traditional
IRA has a maximum contribution age limit of 70 1/2, the Roth IRA does
not have such a limit. Furthermore, traders using a Roth IRA do not
have mandatory withdrawals at any age, whereas Traditional IRA investors
must begin minimum withdrawals after the age of 70 1/2.
If you have not
decided on whether to use a Traditional IRA or Roth IRA for your forex
account, please consult a tax advisor.
If you want to trade
currencies with any type of retirement account other than a Roth IRA
or the other retirement accounts covered in the forex
IRA trading section, please call us and we will put you in contact
with someone that can help you (305-600-4651).
|
