With the tax deadline coming up next month, many investors are preparing the make their 2015 IRA contributions before the deadline. Now is also when most investors make adjustments to their retirement portfolios – tweaking allocations within asset classes, and switching asset classes all together. As addressed in a previous newsletter, most individuals are not aware that you can invest IRA funds with CTAs/Managed Futures. The procedure to establish a managed futures retirement account is quite simple, and we’ll explain the steps here:
Step 1: Establish an account with a custodian
Not all custodians are able to custody and service retirement accounts that invest in futures. Therefore, in most cases, an individual has to open an account with a futures specific custodian. While there are many custodians available that service managed futures accounts, the following two happen to be aiSource’s favorite:
Millennium Trust Company
Step 2: Fund your retirement account with the new custodian
Once an account is established as described above, the next step is to fund your account. For most CTA investments, funding with the annual contribution will not be enough, and an investor will have to roll-over some (or all) of their funds from another custodian.
Step 3: Open an account through a futures broker
After establishing your account with a custodian that allows futures transactions, the next step is to open an account with a futures broker. Unlike the equities space, where the broker many times also acts as the IRA custodian, in the futures industry, the brokerage firm will separate themselves from custodian duties. The futures broker clears all the trades that take place in a client’s managed account, and then all year-end tax implications are handled by the custodian.
Step 4: Transfer funds from custodian to broker and start investing!
Once your account is open with the futures broker, your new IRA custodian will automatically transfer funds to the broker so that you may invest with CTAs. The next step is to build a portfolio of non-correlated CTAs and start investing!