By Lisa N., Branch Manager and Blog Contributor
It’s true that individual retirement accounts IRAs were designed to encourage long-term investing. But it’s equally true that there could be some advantages for traders who utilize IRAs. In fact, traders with 401(k) accounts from previous employers might want to consider whether they would benefit from transferring those funds into an IRA.
401(k) Transfer Can Expand Trading Choices
Why would traders consider such transfers? For starters, 401(k) plans may have few investment choices that fit a trading strategy. Transferring your 401(k) funds into an IRA at Scottrade gives you access to stocks, bonds, mutual funds, exchange-traded funds and some types of options. Let me repeat that for those who are unsure: You are able to trade a large variety of securities in an IRA compared to most 401(k) plans.
IRA Tax Advantages for Traders
Tax-deferred growth or tax-free growth for Roth IRAs if you’re following withdrawal rules, can be a powerful benefit for traders because taxes act as a drag on investment returns. Second, you generally don’t have to figure the cost-basis of securities after each trade, which can eliminate a big headache for active traders. If you have questions about the tax implications of trading in an IRA account, you should consult a tax advisor.
Trading Restrictions for IRAs
Be aware, you cannot use IRA assets as security for a loan, which means margin is not allowed in an IRA. That also means no short selling. In addition, you generally cannot take tax losses with an IRA. Despite those limitations, the tax benefits and investment flexibility of IRAs make them worthy of consideration for those who use trading as part of their retirement investment strategy.
What types of securities do you trade in your IRA?
Also of Interest:
Lisa N. has been at Scottrade since 1999. She is the branch manager at the Newton Center, Mass. branch.
This article is for information purposes only and does not guarantee a profit. None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security before making an investment decision
Scottrade does not provide tax advice. The material provided is for informational purposes only. Please consult your tax, or legal, advisor for questions concerning your personal tax or financial situation.