What options exist for creating and funding a retirement account, if all one's income is derived solely from investing and trading? Has anyone found a way to do this, who is not a day trader? From the research I've done so far, I can only find one: you must qualify as a professional trader and form an entity. Is there another option that has escaped me? Is it also possible to form an entity as an investor or only as a trader? All my income is derived from investments/trading, and because of this I can't contribute to a retirement account. But I also don't know if I qualify as a professional trader. I am not a day trader. I generally only make a few hundred trades a year, and I only trade volatility instruments, so I don't even put trades on except under certain circumstances, and may trade very little in the interval. As an aside, is anyone aware of the reasoning behind making it difficult for those whose income is derived from investments/trading to contribute to a retirement account? Since the IRS distinguishes investment income from earned income, and does not allow contribution to a retirement account without earned income, it is clear they are intentionally trying to block independent investors/traders from having retirement accounts. So far as I can see, only independent investors & traders lose out as a result of these laws, since the income of those who trade with a firm will qualify as earned income.
I would check out https://www.greentradertax.com; their website has a lot of free info, some paid publications, and you can get a consultation with them for an hourly rate. I think that even just 1/2 hour with one of their top people should answer your main questions, as they deal with this sort of thing more than probably any other firm.
Check out number 48 http://www.sdretirementplans.com/self-directed-401k-basics/401k-faqs/#3 401k LLC self directed retirement account I have had this since 1996.
Thanks a lot to everyone who has replied so far. All the links and information you sent looks very useful. Will begin looking into it more now.
Handle, before you could set up the self-directed 401k did you have to incorporate as an LLC (S-Corp)? This is one of the issues I'm looking into, since to do that I believe you need professional trader status (for which I'm not sure I technically qualify).
You don't need TTS or have to be a S-Corp to setup a self directed IRA. Some futures brokers recommend using Midland for this - check with your broker. https://www.midlandira.com/ Any Roth IRA traders out there? I pay $0 in taxes on all the profits . I have it built up so that it's to big to fail (hehe) - talk about having it made in the shade - but seriously, I think the Roth is incredible empowering for traders. I heard Cramer say the Roth was the best thing working people had going for them.
Yes! I totally agree. Every year around this time I calculate the amount of taxes I otherwise would have paid. It brings a smile to my face and warmth to my heart.