Trading Forex IRA

Need Help With Investing In A Forex IRA?

Don’t Make These Common Mistakes…

by Martin Martinez

Here are few tips that may Help With Investing In The Forex when using an IRA Account.

A Forex Trading IRA is a special Individual Retirement Account (IRA) that is 

* set up to trade currencies. This is a big help with investing and advantage for traders that want to day trade tax free; something that cannot be done with stocks.

Forex IRA’s allow investors an opportunity to diversify into the largest financial market in the world (foreign exchange) without having to worry about taxes. Any trading profits generated inside the IRA grow tax free.

[Please note that a forex IRA is only beneficial for citizens or residents of the Unites States. It is not necessary for non-U.S. investors or traders. Foreigners can trade currencies tax free in the United States with a regular account, so they do not need to open a forex trading IRA to operate].

Help With investing in a Forex Trading Roth IRA You can either set up a forex IRA account using a Traditional IRA or a Roth IRA. A Traditional Individual Retirement Account (IRA) allows the investor to make contributions with pretax dollars and the account balance compounds tax-free until the funds are withdrawn (usually at retirement).

The Roth IRA, on the other hand, allows contributions to be made with after-tax dollars. The account balance also compounds tax-free, but the funds can be withdrawn tax free if the account is at least 5 years old and the account owner is over 59 1/2.

New forex traders usually ask for help with investing with a common question on how much can be contributed to an IRA. The maximum contributions an individual can make to a Traditional IRA is 100% of earned income up to $3,000 ($3,500 for those older than 50). Likewise, for a Roth IRA, the maximum contribution is 100% of earned income up to $3,000 (tax year 2003).

The contribution limits for both types IRA’s are reduced by any contributions made to either type. If you want to be able to contribute more than $3,000 to a new IRA account, just request additional info on help with investing on forex trading IRA and will see the section on setting up a SEP IRA to trade currencies.

To be eligible to make contributions to a Traditional IRA, a forex trader must be under 70 1/2 years of age and have earned income. For Roth IRA contributions, traders must have earned income and adjusted gross income (AGR) of less than $110,000 if single or $160,000 for married couples.

If you are setting up an Individual Retirement Account to trade currencies, please keep in mind that by law, there are penalties for early withdrawals. Both the Traditional IRA and the Roth IRA carry a 10% penalty for withdrawals before age 59 1/2 (for exceptions to early withdrawals, please consult your tax advisor or the IRS).

Whereas the Traditional IRA has a maximum contribution age limit of 70 1/2, the Roth IRA does not have such a limit. Furthermore, traders using a Roth IRA do not have mandatory withdrawals at any age, whereas Traditional IRA investors must begin minimum withdrawals after the age of 70 1/2.

For additional help with investing in a Traditional IRA or Roth IRA for your forex account, please consult a tax advisor.