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I am looking for feedback from anyone who is trading futures through their self directed IRA.
1. Were any of you able to open up an account without also signing a document promising to pay back any losses were the account to go into a debit?
When I signed up with my IRA custodian, I only asked if I could trade futures with a self directed IRA through them. They assured me that I could.
However, one of the brokers I am interviewing stated that they don't think I will be able to open an account with them (we will find out for sure on Monday) due to the fact that my custodian will not allow me to open any account where I an be personally liable for any debits that may arise in the trading account.
I got the impression from the conversation, though I failed to ask directly, that this was a universal rule that all self directed custodians adhere to. Has anyone run into a similar obstacle hurdle?
2. Additionally, for those who are trading futures in a self direct IRA, are your margin requirements stricter than regular individual accounts with the same broker. Though I have no desire to trade with margins that are lower than overnight initial margins, this broker stated that I would only be able to trade with full regular margin requirements. FWIW, I think this is prudent and don't mind.
However, I am just trying to figure out which of these requirements/policies are universal/regulated by law and which ones are at the discretion of the clearing firm.
Thank you in advance for taking the time to respond. I appreciate it.
Can you help answer these questions from other members on NexusFi?
You will be required to sign that agreement, to pay back losses.
My self directed IRA is full margin. Not sure about others, it doesn't impact me. If you are trading on less than full margin it is probably a smart decision to not trade with retirement funds.
Thank you for taking the time to respond. So, in plain English, this is a hurdle that my custodian is placing upon me since obviously your custodian didn't have a problem with you signing this document.
@JTurner77, first off... the custodian is protecting you... simply stated, the moment you pay losses on that IRA futures account with funds outside of the IRA you will have to have a nice chat with the IRS about penalties... the best simplest way to trade futures within an IRA is with Interactive Brokers..
SD IRA's are mostly used when you want to either do private placements to funds using IRA $$$ or if you want to purchase hard assets (REO, etc.) via an LLC (which is in terms owned by an IRA)... you can indeed trade via a SD IRA by simply making a placement to an IRA LLC and then having the IRA LLC open the futures account... as long as the IRA LLC has enough assets the whole concern over credit risk with the FCM goes away... if dont recommend it if you have anything less than $50K in that IRA to be honest..
I would be concerned with signing anything that imposes individual liability when the owner of the account is the IRA trust... that is just opening oneself to issues with the IRS where they could even invalidate the trust and you will be facing deep penalties.
This has been a pretty surreal experience and I am beyond puzzled. Last night I did some research and have come across numerous instances where people are saying that personal guarantees are essentially a prohibited transaction that have actually disqualified the IRA.
I also read the following info from this estate planner:
Correct me if I am wrong, but based on the information I have presented, does it not suggest that up until October 2011 that all futures accounts with signed personal guarantees were by definition engaged in a prohibited transaction that thus rendered them distributed and subject to taxes and penalties?
I understand that you are not a lawyer or accountant so I am in no way trying to put you or anyone else on the spot nor will I take it as legal advice. I totally understand your cya disclaimer.
With that said, I am amazed that there really hasn't been much discussion on these forums on this subject. There is an entire cottage industry being built upon the notion that you can trade futures through an IRA.
First, the majority of self directed IRA custodians say, "Sure, you can trade futures!"
Second, the overwhelming majority (if not all) futures accounts require personal guarantees, as you attested to above and I think we all agree is the norm.
Third, it appears that these personal guarantees are widely believed to be prohibited transactions.
It is just beyond bizarre to me that there may be tens of thousands of IRA invalidated by unsuspecting individuals who have been told by professionals that it is okay to trade futures. Like I said, I am shocked that this issue hasn't been raised here.
Right now I am feeling a little cheated and annoyed by the collective marketing efforts of these self directed custodian companies. It is almost like being told you can buy a car and later learning that you are not allowed to put gas in the tank.
I am recently active poster here and will refrain from posting any further on this subject as I fear I may be on the verge of overstaying my welcome. But I would love to hear how other people with IRA accounts feel about this.
Why would you want to trade futures through an IRA? What is the benefit?
Futures trading and IRA are two different areas for me. I would not want to take the same risk I do in futures with an IRA. So to me it seems absurd to trade futures through an IRA.