IRA account funding

When opening and funding a Fixed Income  IRA account with an Interactive Broker, you need to make an IRA customer type selection from the following available customer-types:

  • Traditional

This type of IRA savings plan will allow for individuals (taxpayers) to invest their earnings until it becomes time to withdraw them. However, there are annual limits that are imposed on contributions, which depend on the age of the account holder. In addition, these contributions may not always be deductible, since deductibility will rely on the account owner’s circumstances. The invested earnings are generally tax deferred until time of distribution. At that time, the earnings will be subject to taxes.

  • Traditional Rollover

This is a case where a traditional IRA retirement account obtains funds that are obtained directly from a plan that’s been sponsored by an employer (ex. – pension plan or 401(k)), within a period of 60 days from the plan’s distribution. The most common circumstances for a traditional rollover are retirement or switching jobs.

  • Traditional Inherited

This is an IRA account in which you’re allowed to set up as a Traditional IRA beneficiary, when you’ve inherited from your spouse or another owner of an IRA account, when that owner has died. This is done in order to receive the beneficiary assets from the deceased’s IRA.

  • Roth

This is an IRA retirement plan that will allow individuals (taxpayers) to invest earnings. This plan will be subject to certain income limits. Tax-free accumulated earnings along with contributions are considered nondeductible.

  • Roth Inherited

This is an IRA retirement account that you can set up, when you are the beneficiary of a deceased spouse’s or another deceased IRA account owner. This will allow you to receive the beneficiary assets.

  • Simplified Employee Pension (SEP)

This is a retirement plan that is tax-deferred and utilized by small businesses and individuals who are self-employed. Here, an employee can invest a percentage of the businesses pre-tax income.

  • Simplified Employee Pension (SEP) Inherited

This is an IRA retirement account that you can set up, when you are the beneficiary of a deceased spouse’s or another deceased IRA account owner. This will allow you to receive the beneficiary assets.

Transfer Methods

The ways that IRA retirement accounts are funded are known as “transfer methods”. The following methods are cash transactions and it should be noted that Trustee-to-Trustee transfers are also able to use ACATS position transfers in their Account Management.

  • Contribution –This is the amount of assets (dollars) that you are investing into an IRA account. These contributions are limited by regulations relating to the account holder’s age and the year that the contribution is made. All contributions will be reported to the IRS (Internal Revenue Service).
  • Rollover– This indicates a funds transfer from another trustee’s/custodian’s IRA retirement that occurs within 60 days after a distribution and is placed in an IB-IRA account. All rollovers are also reported to the Internal Revenue Service. By regulation, in order to perform an asset rollover, IRA account types will need to be the same. For example, if a Roth IRA is the originating account, then the IB account will also need to be a Roth IRA.
  • Direct Rollover – This relates to a funds transfer to an IB Traditional IRA account from a qualified 401(k), pension or other qualified plan. With Direct Rollovers, the retirement assets are transferred directly to an IB from the employer qualified plan (pension, 401(k)) by the custodian or trustee of your plan. Direct Rollovers are also reported directly to the IRS, even though there are no penalties or withholding taxes applied to the rollover.
  • Trustee-to-Trustee– This indicates the transfer of funds to an IB-IRA account from an IRA Account that is held by a different custodian/trustee. Here, the funds transfer is performed directly from custodian/trustee to custodian/trustee and there no assets distributed to you. An ACAT position transfer can be made, however the Tax ID and the IRA account types will need to match in order to conduct the transfer. This type of transfer does not need to be reported to the Internal Revenue Service.