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Types of Accounts

We offer seven unique account types:

  • Individual Account
  • Joint Account
  • Traditional IRA
  • Rollover IRA
  • Roth or Conversion IRA
  • Education Savings Account (ESA)
  • Custodial Account

Individual Account

An Individual Account is a taxable account (this means interest, dividends and capital gains and losses are reported to the IRS every year) owned by just one person. We'll call this one "plain vanilla." If you want a plain ol' brokerage account, for just you, with no limitations on how much you can put in or take out, this is the one to choose. To open an individual account, you must have reached the age of majority for your state of residence (which means no minors - in most states this is age 18).

Joint Account

A Joint Account is a taxable account (this means interest, dividends, and capital gains and losses are reported to the IRS every year) owned by two people.

Joint accounts are joint tenants with rights of survivorship. This designation has a few important features. For one, you and the joint account holder have equal claim to the assets in the account. Either one of you can place trades, transfer money, and make other account changes. Also, this means that when one of the account owners dies, sole ownership will be transferred to the remaining account owner without having to go through probate. For more information on the tax implications of this type of account, please consult a tax advisor.

To open a joint account, both applicants must have reached the age of majority for their respective state of residence.

Traditional IRA

A Traditional Individual Retirement Arrangement (IRA) is an investment account geared toward investors who want to build a nest egg for retirement. You're allowed to stash away a set amount every year, up to the current IRS limits. As a bonus, contributions you make into a Traditional IRA may be tax-deductible (provided, of course, the IRS requirements are met). Plus, interest, dividends, and capital gains in the account aren't taxed until you withdraw money from the account. If you withdraw money prior to turning 59 1/2, you may have to pay penalties on top of any taxes you owe. See your tax advisor for more information.

You also have the option to use a Traditional IRA to roll over an old retirement plan, like a 401k. Most retirement plans out there are tax-deferred, and so is a Traditional IRA, so you may be able to maintain the tax-deferred status of the assets you have in an old retirement plan. As always, if you have questions about your specific retirement plan, consult a tax advisor, or give your current retirement plan administrator a call.

For specific information about Traditional IRAs, rollovers, and tax related questions, please consult a tax advisor and review IRS publication 590.

Roth or Conversion IRA

A Roth Individual Retirement Arrangement (IRA) is one of the more recent investment options available to help individuals prepare for retirement. To open and contribute to a Roth IRA, you have to meet certain eligibility requirements set by the IRS, and the amount that can be contributed each year is limited, just like a traditional IRA. Roth IRA contributions are made after-tax, but earnings and eligible withdrawals are not taxed.

Contribution limits indicate the total amount a taxpayer may contribute to their combined IRA accounts in any given tax year.

A Roth Conversion IRA is an account that is used to hold assets converted from a Traditional or Rollover IRA. If you've contributed tax-deferred dollars to a Traditional or Rollover IRA be aware that when you complete a conversion you will owe regular income taxes on the amount you converted for the year of conversion.

For specific or tax-related questions about Roth IRAs or Roth Conversion IRAs, please consult a tax advisor and review IRS Publication 590.

Education Savings Account (ESA)

An Education Savings Account (ESA - also known as a Coverdell ESA) is used to stash away funds for qualified education expenses for the Designated Beneficiary (the student). Contributions are made on an after-tax basis, and earnings generated may not be subject to taxes (upon a qualified distribution).

One cool thing about an ESA is that you can use the funds on any "qualified education expense," not just higher education. This is different from some other tax-advantaged education plans out there. The designated beneficiary has to be under age 18, and once they reach that age, you can no longer add money to the account.

Important Tip: Contributions made to an Education Savings Accounts do not provide a tax break or a tax deduction for the contributor. Annual contribution limits apply. Currently you can contribute up to $2,000 per year.

Custodial Account

A Custodial Account is a taxable account (this means interest, dividends, and capital gains and losses are reported to the IRS every year) created for the benefit of a minor. Custodial accounts are opened under the Uniform Transfer to Minors Act (UTMA), making the minor the owner of the account assets. However, a custodian (this is where you come in) must manage the account until the minor reaches the age of distribution for their state of residence (usually age 18). State laws may restrict who can open a custodial account. Please consult a financial advisor for additional information on custodial account restrictions and tax reporting questions. Also, there can only be one minor and one custodian for each custodial account.

Account Features

Depending on the type of brokerage account you're opening, you may be able to apply to trade options and to apply for margin on the account.

All account types can apply and be approved for options trading. However, Custodial and ESAs can only be approved for Level 1 options trading, while Individual, Joint, IRA, and Roth IRA accounts can be approved for Level 2 options trading. At this time, only Individual and Joint accounts can be approved for margin borrowing.