How and When to Use a Direct Rollover
Generally, an investor changing jobs or leaving the workforce may utilize either a Direct Rollover or Indirect Rollover election to continue their retirement savings outside of their employer-sponsored retirement plan. The Direct Rollover method transfers the assets directly from the retirement plan into the investor's IRA, avoiding the 20% mandatory IRS withholding. No assets are transferred directly to the IRA owner. This option to transfer retirement assets has no age limitations.
Cash and securities held within an employer-sponsored retirement plan, such as a 401(k) or 403(b) plan, may be re-located elsewhere, either in an IRA account or another employer-sponsored retirement plan. The plan administrator is required to provide a reasonable direct method of asset transfer. Completion of a Direct Rollover form issued by the administrator may be required, in some cases. Therefore, it is important to check with the plan administrator.
For those transfers that require a broker-supplied Direct Rollover form, Interactive Brokers provides a convenient Direct Rollover Transfer In Authorization form. Completing and mailing the form directly to Interactive Brokers will begin the transfer of cash balances only into a Traditional IRA, Rollover IRA, or SEP-IRA. Non-cash direct rollovers are currently not available.
Interactive Brokers will forward the Direct Rollover request to the plan administrator for processing. Funds may be transferred by either wire transfer or check directly to Interactive Brokers.
To initiate a Direct Rollover from your retirement plan, go to the Funds Management section of the Account Management Menu. Choose Cash Transfers for this Cash Deposit Transaction and select the method Direct Rollover (IRA) to initiate the process. Contact the Funds & Banking Group with any additional questions.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this article was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Will the consolidated statement reflect the tax basis choices of client accounts?
Overview:
Clients have the ability to select one of three tax basis methods, First in First Out (FIFO), Last in First Out (LIFO) and Max Losses. The method selected will affect the P&L values which are posted on the statements.
In an advisor structure, where the advisor has the ability to create a consolidated statement, those P&L values posted will properly reflect the tax basis choice as these calculations are done independent of how a statement may be viewed.
Does IB offer managed accounts?
IB, itself, does not provide advisory services to customers, but we do clear for a rather large number of Financial Advisors who do carry and clear their customer accounts with IB. As we are not in a position to provide personal recommendations as to Financial Advisors, you would need to research for an advisor on your own and if they are not already affiliated with IB, request that they open an account on your behalf with IB.
You may also wish to review the website of a US industry regulator such as FINRA (www.finra.org) which provides information regarding selecting investment professionals along with a tool referred to as FINRA BrokerCheck which allows investors to check the professional background of individual brokers.
Can advisors and other family accounts use WebTrader or MobileTrader?
Overview:
Beginning approximately March 5, 2009, financial advisors and proprietary trading group accounts (otherwise known as STL - Separate Trading Limit) have the ability to access both the WebTrader and MobileTrader platforms.
Note:
Only single account allocations are supported at this time. Orders cannot be entered using allocation groups or profiles.
Can advisors trade Mutual Funds?
Overview:
Mutual Funds
Beginning with TWS build 892, advisors have the ability to trade mutual funds by using a single account allocation.
What is a Roth IRA?
A Roth IRA is an Individual Account allowed under the tax law of the United States. It's unique tax structure is the main advantage over a the standard Traditional IRA. Some of the advantages are listed below:
- Direct contibutions must be from earned income which has been reported on form Schedule C (Business income), form Schedule F (Farm income), or on U.S. form W-2. (Earned income typically does not include Social Security benefits, pensions, interest, dividends, rental income, or captial gains, but it can include alimony).
- Contributions may be made to a Roth IRA even if the owner participates in a qualified retirement plan such as a 401(K).
- Direct contibutions (not including rollovers) may be withdrawn tax and penalty free at any time since the funds have already been taxed.
- Rollovers (converted before age 59 1/2) may be withdrawn tax and penalty free after the seasoning period which is currently 5 years (after waiting at least 5 tax years, the original converted amount may be withdrawn tax and penalty free).
- Earnings may be withdrawn tax and penalty free after the seasoning period and age 59 1/2. (Up to $10,000 USD in earnings withdrawns are considered fax-free if the money is used to purchase a principle residence).
- Roth IRA does not require manditory distribution based on age. Owners who do not need the money may leave it to their Heirs. However, beneficiaries who inherited Roth IRAs are subject to the minimum distribution rules.
What does the 'Pending Advisor' status mean next to my withdrawal request?
Overview:
In the Funds Status section of Account Management, client accounts who are logged in and have requested a withdrawal, will see the status as 'Pending Advisor'.
Information:
In the advisor structure, client accounts can request withdrawals by logging into Account Management just as any individual account would. Once a withdrawal request is made by a client account, the advisor must approve the request. If the Advisor does not approve the request, the withdrawal request will still be processed, but there will be a 3 business day delay.
Advisor Steps to Confirm:
Once a withdrawal request has been submitted by a client account, the advisor will receive an email notification, stating that a client has requested a withdrawal. In order to approve, the advisor must log into Account Management. The advisor will select the appropriate client account number on the Welcome page of Account Management. A list of all Pending Items will appear for the selected account. The advisor clicks the 'Consent' button in order to expedite the processing.
How do I convert my advisor client account to an Individual IB account?
Overview:
Due to varying reasons, some clients of advisors no longer want their account to be managed by a Financial Advisor, but they wish to maintain an individual account at IB.
Information:
To transfer an FA Managed account to an Individual IB account, you must create a new Individual account where all aspects of the new account match those of the existing account (titles, tax ID's, trading permissions). Once the new account is approved, log into the old account's Account Management, select Funds Management -> Internal Transfers.
Note
- Only Cash can be internally transferred from an FA managed account to an Individual IB account. IB does not currently provide a facility for performing an internal account transfer when moving from an FA managed account to an individual account.
Can an advisor client account trade for himself?
Overview:
By default, client accounts do not have Trading Access and cannot sign into TWS or Web Trader. They are limited to Account Management where they can view Statements and Trade Confirmations, as well as perform account administration tasks. However, there are occasionally requests by advisors that a client be given the ability to trade their own account.
Information:
There is a feature that allows the Advisor to give Trading Access to his Clients. This can be configured by the Advisor in Account Management -> Trading Access -> Client Trading. The Client would then need to subscribe to market data if they desire and would be able to trade only his own account.
Notes
- Working orders would be accessible by either the client or the advisor.
- The trading privilege of client accounts will be displayed in CAST. On the Account Information page of the FA, in the 'Clients of this FA' section, a column entitled 'Client Trading' will show Enabled, Disabled or nothing.
How do I change the wrap fees charged to my clients?
Overview:
Advisor accounts have the ability to configure the fees which they assess to their clients.
Information:
The procedure for changing fees for a client account is as follows. You must log into Account Management and from the navigation pane on the left, select Funds Management -> Client Fees. You will need to change the fees in this section on line, but you still must have the client sign the fee change form and submit to us for processing.
Please see the 'Advisor Wrap Fees' link avaiable at the bottom of this page for additional information, such as the available billing methods and the fee caps currently in place.
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