Are broker "Limited Margin IRA Accounts" Legal?

D

David Donner

More & more brokers have "Limited Margin IRA Accounts" where you cannot trade more than the money in your account, but, you can get instant access to the proceeds from a sale of a trade, instead of waiting for the trades to settle.

I thought IRA & Roth IRA accounts were supposed to be CASH ONLY accounts, where you DID have to wait for trades to settle before reusing the proceeds, as well as all the other rules of a cash account.

Has that changed?

Are "Limited Margin IRA Accounts" IRS approved?
 
David Donner said:
More & more brokers have "Limited Margin IRA Accounts" where you cannot trade more than the money in your account, but, you can get instant access to the proceeds from a sale of a trade, instead of waiting for the trades to settle.

I thought IRA & Roth IRA accounts were supposed to be CASH ONLY accounts, where you DID have to wait for trades to settle before reusing the proceeds, as well as all the other rules of a cash account.

Has that changed?

Are "Limited Margin IRA Accounts" IRS approved?
More...

been that way for ages - it's legal
 
So I have a Roth IRA with TD Ameritrade, and just asked them if I could apply for limited margin. They told me they don't have limited margin for a Roth IRA, but instead have full margin for it. That sounds wrong, but they said to apply through the website for full margin for the Roth IRA account, and I was approved. I am surprised at this! Does anyone know anything else about this? It sounds too good to be true, and I'm wondering why TD Amer is allowing it without running into IRS problems.
 
vanman72001 said:
So I have a Roth IRA with TD Ameritrade, and just asked them if I could apply for limited margin. They told me they don't have limited margin for a Roth IRA, but instead have full margin for it. That sounds wrong, but they said to apply through the website for full margin for the Roth IRA account, and I was approved. I am surprised at this! Does anyone know anything else about this? It sounds too good to be true, and I'm wondering why TD Amer is allowing it without running into IRS problems.
More...
You have margin at 1 times your balance, which allows you to immediately access your funds after you close a trade. You don't have to wait on funds to settle. The problem would be if you had margin at 2X, 3X, etc. Trade away.
 
My Roth IRA is fully invested in long term ETF positions. And without selling those positions, it looks like I have margin buying power of about 50% of the account value. The way it is set up now, it looks like I can keep my long term positions without selling them, and still use 50% of my account value to day trade.
 
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