Forex IRA Account Setup

A Forex IRA is a special Individual Retirement Account (IRA) that is set up for US investors to trade currencies. This is a big advantage for traders in the United States that want to day trade tax free; something that cannot be done with stocks. IRA’s that invest in forex allow investors an opportunity to diversify into the largest financial market in the world (foreign exchange) without having to worry about taxes.

Any trading profits generated inside the IRA grow tax free (deferred). To read about the differences between trading using a Traditional IRA and a Roth IRA, click here. You can also go to the managed IRA section if you are interested in opening a managed account inside an IRA.

Instructions to Open and Fund a Forex IRA or Transfer your Existing IRA?

If you are a US investor who is establishing a new IRA Account to trade in the FX market, transferring your existing IRA assets, or rolling over your 401(k), 403(b) or other retirement account (if you are rolling over your retirement plan assets, click here to scroll down to read this important section), these are the steps you need to follow:

  • Complete our IRA Information Form and provide us with some basic, but important details about your particular needs.
  • Fill out the forms from the trust company you plan on using as custodian (Entrust is probably the most flexible custodian and the easiest to deal with). Using a trust company is required for an investor to set up an FX IRA account. This might include a transfer form if you are transferring an existing retirement account into your new one.
  • Complete the FX-related or Managed Account Forms (depending on whether you want to set up a self-traded IRA or a managed one). These forms will be emailed to you once you submit the information request form online.
  • Mail all completed forms with a copy of your photo ID to the custodian company.

    Your Forex IRA Account can take from 2 Weeks (if you are setting up a new account) to 4 Weeks (if you are transferring an existing account or rolling over your retirement plan assets) to Set Up.

Instructions to Open a Roth IRA or Transfer an Existing Roth Account?

If you are setting up a New Roth IRA Account or transferring the assets of your existing one to your new Roth account, please do the following:

Follow the same instructions above for the traditional IRA setup. You’ll just use a Roth IRA Form instead of a regular form from the custodian company (this form will be emailed to you).

Instructions to Open a SEP IRA for businesses or Self-Employed Individuals?

If you are opening a SEP (Simplified Employee Pension) for your business to trade currencies or to invest in a managed account, please do the following:

Follow the same instructions above for the traditional IRA setup. You’ll just use a SEP IRA Form instead of a regular IRA Form from the custodian company (this form will be emailed to you).

Rolling over funds from a Retirement Plan (like a 401(k) or 403(b)) into an IRA and then using it to Trade Currencies.

Usually, companies that have 401(k) Plans or other retirement plans do not allow their employees to rollover their accounts until retirement or until the employee is no longer with the firm. If you want to rollover your retirement plan assets to set up your IRA and are not leaving the company, please check with your firm’s benefit coordinator to make sure that you can do the rollover. The same holds true for government employees and teachers that have 403(b) retirement plans.

How can I Open an FX IRA Account and then Deposit More than $5000 into it (the current 2012 limit per person)?

The above is a common question that our customers have. Here are some possibilities.

Solution # 1
Transfer the assets from an Existing IRA to your new one.

If you already have an existing IRA account with more than $5,000 in it, you can simply transfer the assets to your new Forex IRA account.

Solution # 2
Roll over your 401(k) or 403(b) into a New IRA.

If you retired or left your employer and have more than $5,000 in the retirement plan with that employer, the law allows you to do a tax free direct rollover into an Individual Retirement Account. If you are still working for the same company, ask your benefits coordinator if you can do the rollover.

Solution # 3
Open a SEP if you are Self Employed or Own a Business.

Any employer (corporation, partnership, or self employed individual) can establish a Simplified Employee Pension Plan (SEP). This is true even if the business only has one employee. The SEP allows an individual to contribute the most money to an IRA (up to $50,000 a year for 2012).

If the employer wants to make contributions into a SEP, the employer must contribute the same percentage for all employees of the business who are eligible. To be eligible, employees must be at least 21 years old, must have worked for the business during 3 out of the past 5 years, and must have earned the minimum required compensation ($550 for the year 2012, which is adjusted annually). When desired, the employer may contribute up to 25% (approximately 20% for self employed individuals) of each eligible employee’s compensation. Furthermore, employers may deduct from their taxable income every qualified dollar they contribute to the SEP.

Example: Let’s say you have a business and pay yourself a salary of $50,000 a year, you can contribute $12,500 to your SEP Forex IRA.

Solution # 4
Open a regular account instead of an IRA.

If you cannot take advantage of the three options above, then you cannot trade with more than $5,000 during the first year by opening an IRA. You might consider opening a regular account instead and funding it with more than $5,000.

Using a Trust Company for your IRA.

These flexible trust companies charge a small fee for their services (usually a small set up fee and annual maintenance fee). An IRA to trade currencies has to be established with a special trust company that gives the investor the flexibility to invest in nontraditional retirement investments such as real estate, futures, Tax certificates, currencies, etc. There are various companies that provide these services to investors, including Entrust (which is the most flexible). Every trust company has different requirements. Some work with most brokerage firms in the FX market and some require brokerage firms to go through the trust company’s internal approval process first. Whether you want to open an account to trade FX yourself or a managed IRA, please make sure that you first find out what the trust company’s policy is regarding brokerage firms before you set up an account with them.

If you want to trade with a retirement account other than the ones described in this section, please let us know.

Please note that only US investors can set up Forex IRA’s. It makes no sense whatsoever for a non-US investor to set up a retirement account under US laws.