Individual retirement arrangements (IRAs) are tax advantaged retirement accounts available for individuals earning income in the U.S. These accounts offer significant tax benefits which incentivize individuals to save long term for retirement. These associated incentives often lead to consistent growth in assets under management (AUM) that remain under custody until customers reach retirement age and an increase in trading volume for its financial organization.
To support both our partners’ growth and their customers’ long term retirement saving plans, Alpaca now offers IRA accounts through Broker API.
Tax Advantaged Retirement Accounts for Broker API
Alpaca has launched support for Traditional IRA accounts, allowing customers to deposit pre-tax dollars and earn money on a tax-deferred basis. This means individuals avoid capital gains taxes on asset sales but instead are taxed at their income rate upon retirement. This is especially valuable for individuals who expect to be in the same or lower tax bracket at the time of retirement since they can take advantage of the tax savings on deposits now to maximize the value of their assets.
Additionally, Alpaca now supports Roth IRA accounts, where customers deposit post-tax dollars and earn money tax-free. Withdrawals are also tax-free, provided IRS requirements are met. Roth IRA accounts tend to add the most value for individuals who expect to be in a higher tax bracket at retirement since they can avoid the tax penalty entirely when withdrawing funds as opposed to withdrawing and incurring taxes at their income rate like in a Traditional IRA.
Your users can leverage the tax benefits of IRA accounts to experiment with various trading strategies and asset classes, like options, with no immediate tax consequences and plan for long term savings for retirement.
How can you benefit from IRA accounts?
The unique tax benefits of IRA accounts naturally incentivize customers to reliably deposit and retain funds in the account until they reach retirement age – resulting in greater user retention and consistent AUM growth.
IRA Complexity Made Simple
Intuitive Broker API Integration
IRA accounts can be daunting to approach due the IRS’ rules and guidelines. Alpaca simplifies this with Broker API so you start opening IRA accounts for your customers right away. Account opening, contribution and distribution processing, and IRA specific account documents are managed via the existing Broker API endpoints. New endpoints have also been introduced to manage IRA specific features such as identifying accounts that have exceeded contribution limits – allowing you to efficiently handle the end-to-end experience. Additionally, Alpaca supports specifying beneficiaries on IRA accounts, ensuring your customers' retirement savings are secure.
IRS Compliant Solution
Tax reporting for IRA accounts is more complex than for standard taxable brokerage accounts. The IRS has specific rules dictating how much an individual is allowed to deposit per tax year, when they are allowed to withdraw without incurring any penalties, the age at which customers are required to begin withdrawing funds every year, and more. Alpaca has built these compliance considerations directly into the IRA product, handling all of the activity and tax reporting considerations so you can confidently offer these accounts to your customers.
Streamlined Onboarding for Repeat Users
When offering IRA accounts, customers may want to open both a taxable brokerage account and an IRA account simultaneously based on their investment objectives. To streamline onboarding, Alpaca allows reusing KYC results for the same customer if multiple accounts are opened within 60 days. This reduces KYC costs and enhances the onboarding experience by requiring only one approval for trading across accounts.
Broker API Availability
IRA accounts are only available for individuals that earn income in the U.S. so this account type is available for any Broker API partner that is serving U.S. clients.
For Existing Broker API Partners
To enable this feature, please reach out to your Customer Success Manager or Alpaca’s global support team at [email protected].
IRA’s Key Features
- Traditional and Roth IRA account creation
- Customer beneficiary specification at onboarding or afterward
- Account contributions and distributions managed via APIs
- Easy accessibility to tax documents and IRA-specific notifications, including Required Minimum Distribution (RMD) notices
- Quick identification for accounts that have contributed over the maximum allowed limit for the given tax year
- Single KYC process for repeat customers opening both a taxable brokerage account and an IRA account within 60 days of each other
Get Started Today
Check out our documentation for more information.
If you are new to Broker API and are interested in learning more about IRA accounts or other Broker API features, please reach out to [email protected].
Interested in creating an IRA account for Trading API? You can expect support for this soon.
The content of this piece article is for general information only and is believed to be accurate as of the posting date but may be subject to change. Alpaca does not provide investment, tax, or legal advice. Please consult your own independent advisor as to any investment, tax, or legal statements made herein.
All investments involve risk, and the past performance of a security, or financial product does not guarantee future results or returns. There is no guarantee that any investment strategy will achieve its objectives. Please note that diversification does not assure a profit, or protect against loss. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.
Securities brokerage services are provided by Alpaca Securities LLC ("Alpaca Securities"), member FINRA/SIPC, a wholly-owned subsidiary of AlpacaDB, Inc. Technology and services are offered by AlpacaDB, Inc.
This is not an offer, solicitation of an offer, or advice to buy or sell securities or open a brokerage account in any jurisdiction where Alpaca Securities are not registered or licensed, as applicable.
