WHAT IS AN INDIVIDUAL RETIREMENT ACCOUNT (IRA)?

An Individual Retirement Account (IRA) is a specialized investment account that can play a crucial role in helping you save for retirement. In simple terms, it is an account specifically designed for retirement savings with potential tax benefits.

With an IRA, you can contribute money regularly up to an annual contribution limit, and that money can grow through investment options such as stocks, bonds, or mutual funds. Unlike traditional retirement plans provided by employers, an IRA gives you more control and flexibility over your investments.

tastytrade also provides the ability to trade options with an IRA. Please see the table further below to see which trading level is appropriate for you.

One significant potential advantage of an IRA is the potential for tax benefits compared to other brokerage account types.

Depending on the type of IRA you choose, you may be able to deduct your contributions from your taxable income in the year contributions are made or contribute post-tax money that grows tax-free even upon withdrawal after the qualified retirement age. This can help lower your taxable income and potentially save you money.

WHAT IS THE DIFFERENCE BETWEEN A ROTH AND TRADITIONAL IRA?

The difference between a traditional IRA and a Roth IRA comes down to how taxes are treated between the two.

For a qualified traditional IRA holder, contributions are tax deductible for the year that the income is earned up to a certain amount. That can give you an up-front tax break. The catch is that when you retire and withdrawal that money, you will have to pay taxes on that money – in a traditional IRA, potential gains year to year are not taxed, as taxation occurs upon withdrawal.

On the other hand, with a Roth IRA, you do not get a tax break for your contributions as post-tax money is contributed. Bummer, right? But here is the exciting part: when you retire and start taking money out of your Roth IRA, those withdrawals are tax-free! Yes, you read that right. Tax-free! It is like a sweet reward for patiently waiting until retirement to enjoy the fruits of your savings labor. Just like a traditional IRA, potential gains in a Roth IRA are not taxed. and can grow tax-free year to year. But unlike traditional IRAs, taxes are not owed for qualified withdrawals.

ROTH VS. TRADITIONAL IRA – WHICH IS BETTER?

The question of whether a Roth IRA or a traditional IRA is better ultimately hinges on individual circumstances and preferences. A Roth IRA may be more advantageous for those who anticipate being in a higher tax bracket during retirement and prefer tax-free withdrawals. It offers greater flexibility in accessing funds and avoids mandatory distributions, making it a suitable choice for those who value control and a potential tax-free retirement fund.

However, a traditional IRA may be more beneficial for individuals seeking immediate tax deductions since contributions are tax-deductible up to a certain amount, potentially lowering year to year tax obligations. It can be advantageous for those expecting a lower tax burden in retirement and are comfortable with eventual taxable distributions.

Evaluating your financial goals, tax considerations, and future income projections is critical in determining which type of IRA aligns better with your investing needs.

WHAT CAN I INVEST IN AND TRADE WITH AN IRA?

You have plenty of options when it comes to what you can trade in your tastytrade IRA, including stocks, bonds, and futures products. You can also trade options and trade various strategies to create a strategic approach toward your investment goals. The table below gives a breakdown of what you can and cannot trade with us.

IRA The Works (limited margin)Basic IRA (limited margin)Limited / Cash*

Buy stock

Short sell stock

-

-

-

Buy options

Sell covered calls

Sell cash-secured puts

Defined-risk options spreads

-

Sell naked puts

-

-

-

Sell naked calls**

-

-

Futures^

-

-

Cryptocurrencies

-

-

-

Buy stock

IRA The Works (limited margin)
Basic IRA (limited margin)
Limited / Cash*

Short sell stock

IRA The Works (limited margin)

-

Basic IRA (limited margin)

-

Limited / Cash*

-

Buy options

IRA The Works (limited margin)
Basic IRA (limited margin)
Limited / Cash*

Sell covered calls

IRA The Works (limited margin)
Basic IRA (limited margin)
Limited / Cash*

Sell cash-secured puts

IRA The Works (limited margin)
Basic IRA (limited margin)
Limited / Cash*

Defined-risk options spreads

IRA The Works (limited margin)
Basic IRA (limited margin)
Limited / Cash*

-

Sell naked puts

IRA The Works (limited margin)

-

Basic IRA (limited margin)

-

Limited / Cash*

-

Sell naked calls**

IRA The Works (limited margin)
Basic IRA (limited margin)

-

Limited / Cash*

-

Futures^

IRA The Works (limited margin)
Basic IRA (limited margin)

-

Limited / Cash*

-

Cryptocurrencies

IRA The Works (limited margin)

-

Basic IRA (limited margin)

-

Limited / Cash*

-

* By default, IRAs are provisioned to have margin relief, which allows for defined-risk spread trading. However, if you wish to provision your IRA as a cash account instead, please write to accounts@tastytrade.com.

** To qualify for uncovered call writing in an IRA, you must meet the requirements for IRA The Works – our highest trading level.2

^ Your account must qualify for IRA The Works to apply for futures trading. Learn more about CME futures products.

HOW CAN I OPEN AN IRA?

You can apply to open your IRA in minutes with tastytrade by following these simple steps:

1. CHOOSE AN IRA TYPE

Consider the benefits along with your specific requirements and financial goals to find an IRA that is suitable for your personal situation

Open an account

2. FUND YOUR ACCOUNT

Deposit funds by rolling an employer plan into the account, transferring an existing IRA to tastytrade, or making a direct contribution

3. TAKE YOUR FIRST POSITION

Trade or invest by choosing from a wide range of markets and products such as stocks, ETFs, options, and futures


What is an IRA and how does it work?

An IRA is a type of investment account that provides potential tax advantages to individuals saving for retirement. It allows individuals to contribute a certain amount of money each year, which can be invested in a variety of assets such as stocks, bonds, and mutual funds.

The contributions made to an IRA may be tax-deductible in a traditional IRA or made with post-tax money in a Roth IRA.

The investment gains within the account are either tax-deferred or tax-free, depending on the type of IRA, until withdrawals are made during retirement, at which point they may be subject to ordinary income tax.

Do I pay taxes on an IRA?

The taxation of an IRA depends on the type of IRA you have.

In a traditional IRA, contributions may be tax-deductible, but withdrawals during retirement are taxed as regular income.

In a Roth IRA, contributions are made with post-tax money and qualified withdrawals are tax-free. There are also several other types of more specialized accounts that have their own rules around taxes.

Potential gains in traditional and Roth IRAs are not taxed year-to-year, as taxable events only take place upon withdrawal.

Is there a minimum deposit to open an IRA?

Like our brokerage accounts, there are no minimum deposit requirements required to open an IRA.

1 Withdrawals from a traditional IRA before the age of 59½ are subject to a 10% tax penalty, plus any tax associated with your gross income. Please consult with a licensed tax professional prior to taking any action in your IRA.

2 Withdrawals from a Roth IRA do not incur an early withdrawal penalty if it has been five years or more since the account was opened and contributed to unless the distribution did not go to the owner’s beneficiary or estate. Please consult with a licensed tax professional prior to taking any action in your IRA.

All investments involve risk of loss. Please carefully consider the risks associated with your investments and if such trading is suitable for you before deciding to trade certain products or strategies. You are solely responsible for making your investment and trading decisions and for evaluating the risks associated with your investments.


tastytrade, Inc. (“tastytrade”) does not provide investment, tax, or legal advice. tastytrade’s website and brokerage services are not intended for persons of any jurisdiction where tastytrade is not authorized to do business or where such products and other services offered by the tastytrade would be contrary to the securities regulations, futures regulations or other local laws and regulations of that jurisdiction. Options involve risk and are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially significant losses. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC). All customer futures accounts’ positions and cash balances are segregated by Apex Clearing Corporation. Futures and futures options trading is speculative and is not suitable for all investors. Please read the Futures & Exchange-Traded Options Risk Disclosure Statement prior to trading futures products.

Cryptocurrency transaction and custody services are powered by Zero Hash LLC and Zero Hash Liquidity Services LLC. Cryptocurrency assets are held and custodied by Zero Hash LLC, not tastytrade. Services may not be available in all states. Zero Hash LLC and Zero Hash Liquidity Services are licensed to engage in Virtual Currency Business Activity by the New York State Department of Financial Services. Cryptocurrency assets are not subject to Federal Deposit Insurance Corporation (FDIC) or Securities Investor Protection Corporation (SIPC) coverage. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

tastytrade, Inc. was formerly known as tastyworks, Inc.

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