The advantage is you get to accrue profits without paying tax every year. If it is a normal IRA, you pay taxes when you take it out - so you defer tax. If it is a Roth IRA, you've paid tax before putting the $$$ in so at the end the funds are withdrawn without any additional tax. That's quite an incentive. Tax deferal alone is a big incentive but the Roth is the best deal. There was a firm that handled futures trading in IRAs that went belly up a few years back. It was pretty much the only game in town at the time. The name eludes me. I haven't done futures trading through an IRA so I can't confirm with my own experience.
You get a tax benefit when contribute to an IRA, and the gains are not taxed until you take out the money. One of the benefits is your money can grow tax free, which makes a big difference over a long period of time. A more practical short-term benefit is tax returns are simpler. (You are not required to report activity in an IRA). Another benefit is you aren't subject to that idiotic three day settlement rule which you run into trading stocks in an IRA Shockingly, you can trade futures long and short in IRA since technically you are putting up a "performance bond" rather than "margin". (who knows how long it will last). Hard to believe that you can leverage your retirement savings to a rediculous degree with futures, but you gotta wait three days before you can trade with the cash you get from selling a stock. I concluded after much deliberation that the people who tell me how I am allowed to manage my money are complete dimwits. It will last until someone who is even more dimwited loses their life savings gambling the fut's and tries to sue someone. ("it can't be my fault...")
It's simple.You can short and long futures anyway you want as long as the full margin is met. As usual, when you violate the margin requirement, IB liquidates your position in real-time to bring your position into compliance.
This site has some good info on IRA investing: http://www.aicpa.org/pubs/jofa/apr2000/preston.htm The IRS is pretty vague on what you can & can't do: http://www.irs.gov/retirement/article/0,,id=111413,00.html#19 Hope this helps, Smitty
there are, of course, restrictions on where you can put money in a qualified plan (as dumb as it is, but we are talking about the gov.)... the guidlines are buried in the IRS code, i was just going off memory however, last time i remember looking at that section of the code. the IRS code is subject to varying interpretaions and i did see at IB its available so thats the bottom line if the broker allows it or not and how they interepret the IRS code. and maybe they even ammended it since the last tiem i looked, occurs often. advantages 1) of course tax adjustment on contributions 2) tax deffered earnings, although the tax spread is minimized with the last tax package, and depends on your tax bracket and type of capital gains, short vs. long and overall tax situation disads 1) penalty fo rearly withdrawal under 59.5 2) possibly paying higher taxes, again depending on your sitution
You set up your IRA with one of the few Trusts that allow it. I've been trading a Futures IRA since '99. My futures broker Alaron along with many of the other major futures firms use http://www.mtrustcompany.com/ You can trade the IRA futures acct just like any other futures acct (short, long, options, etc). I think it has something to do with futures "margin" not actually be "margin" but a performance bond. This has been around for a while but firms just don't advertise it. They usually want you to have a decent size acct to go through the trouble of setting this up (mine is $50k +).
My wife just had her IRA transferred to IB. She is cleared to trade futures, options, sell naked options. As long as you meet the margin, I don't think there are any rules that try to protect you in a IRA. Some of my friends have successfully traded their IRA into the ground...
Futures margins are not borrowed money, they are a performance bond, so there is no restriction on futures trading, long, short, options, whatever. Some of the trusts are flexible enough to allow you to place real estate and other alternative investments in your IRA as well. I work with Sterling Trust in Waco, and am happy with their service, but there are lots of others that can do the same thing. Jessie
I have an IRA futures account with IB. Works just like my other account. I don't trade my IRA account nearly as active but on those setups that rate 7 or higher on a scale of 10 I'll trade in my IRA. Have actually seen some nice growth the past couple months.
You may be aware, but there is a lot of information in IB's discussion forum about futures and IRA's. Simple do a search on "Futures" AND "IRA" and you'll come up with a lot of great links. Also, on IB's web site under FAQs is this statement regarding other options (no pun intended) for the IRA trader: What Can I Invest In? Stocks plus covered call writing (covered shares are restricted), buying calls (funds equal to the aggregate exercise value of the long calls are restricted), and buying puts (shares subject to exercise are restricted). The IB IRA may be structured as a Stock Cash Account (if you choose to trade only stocks) or as a Stock Options Level I Account (if you choose to trade options in your IRA).