How to open a traditional IRA

How to open a traditional IRA

A traditional individual retirement account (IRA) allows your client with earned income to make retirement contributions. There are no minimum amounts required to open an account, and contributions to the account grow tax-deferred. Beginning tax year 2020, individuals with work earned income may contribute to a traditional IRA regardless of age.

The repeal of the maximum age for traditional IRA contributions is for tax year 2020 and beyond. If your client is age 70.5 or older, they cannot make a traditional IRA contribution for tax year 2019.

You can open a traditional IRA using digital onboarding, DocuSign® or paper forms.

All processes

A completed IRA Account Application form:

  • Your firm name and master account
  • The account holder's name, home address, identification number Tooltip , birth date, telephone numbers, citizenship status, employment status, and the employer, occupation, business address, and business phone number
  • Adobe® Reader® or Adobe Acrobat® 7.0 or higher (download the latest version on the Adobe website)
  • If the account holder is affiliated with a member firm of an exchange or FINRA and Rule 3210 applies, a FINRA Rule 3210 Consent Letter
  • If applicable, account beneficiary(ies) information, including name, Social Security Number (SSN), birth date, relationship to account holder, beneficiary type, and the percentage share of the account
In addition to the information above, the following information may be required:
Additional features
Account opening method
  • Schwab recommends using digital onboarding for the fastest, most secure experience for you and your clients. For details, see How to use digital onboarding.
  • If using DocuSign to submit forms:
    • For existing Schwab clients, a complete Schwab Advisor Center® profile with the account holder's current email address and mobile phone number
    • For new-to-Schwab clients, the email address and mobile phone number
    • All clients must use either Alliance Authentication (only available when starting the envelope within Schwab Advisor Center), or, both text message (SMS) authentication and Knowledge Based Authentication (KBA) for DocuSign (available in both Schwab Advisor Center and the DocuSign Console)

For details on this process, see How to use digital onboarding.

Digital onboarding supports traditional IRA account open, and contribution and distributions set up in a single, end-to-end digital experience for you and your clients. Contributions and distributions include:

  • ACAT asset transfer (TOA)
  • Link external bank account ACH (MoneyLink)
  • Check requests standing authorization (SLOA)
  • Internal cash transfers (journals) standing authorization (SLOA)

As Schwab transitions from digital account open (single account open with no contributions or distributions) to digital onboarding, you may need to access digital envelopes in two places:

ForSteps
Legacy digital account open envelopes
  1. Go to Account Management on Schwab Advisor Center.
  2. Click Manage Schwab envelopes.
  3. At the top of the page, click Schwab Envelopes for Additional Workflows.
  4. Edit, send, or submit existing draft envelopes.
    • Completed envelopes will continue to be accessible and will expire after 180 days.

Note: For new envelopes, follow the digital onboarding workflow.

New digital onboarding envelopes
  1. Go to Account Management on Schwab Advisor Center.
  2. Click Open and fund an account.
  3. Click Create envelope.
  4. View in progress or completed envelopes via Manage Schwab envelopes.
  5. Review and take action on all digital onboarding envelopes (draft, waiting for client approval, action needed, completed).

For details, see How to manage envelopes.

For details, see How to use DocuSign

Use the Open Account- IRA Accounts form to complete the workflow.

Once you have submitted your request:

To select a form, go to the Forms library on Schwab Advisor Center.

Form: IRA Account Application
Form: IRA Distribution Form
Resource: Digital onboarding education

Form: Options Trading and Margin Application
Form: Power of Attorney (Individual POA)

 

Is there a minimum amount required to open a traditional IRA?
No.

Are traditional IRA contributions tax-deductible?
Depending on your income level, traditional IRA contributions may be tax-deductible.

Can my client make a stock contribution to an IRA via securities journal?
No. Regular IRA contributions must be cash or cash equivalents. Funding via securities journal cannot be used to make an IRA contribution. Stock certificates may however be rolled over as a result of a qualified plan distribution or if it was originally distributed as a stock certificate from the same type of IRA under the 60-day rollover rule.

When is the deadline to fund a traditional IRA and apply contributions to a specific tax year?
The deadline is April 15 in the year following the tax year for which the contribution is intended. If April 15 falls on a weekend or holiday, the deadline moves to the next business day.

If multiple signers are assigned to a form, in which order do the signers receive and sign the form(s)?
The order the signers are notified that a document is pending signature depends on the order in which you listed the signers on the envelope-creation page. Signers receive an email notification in sequential order after each signer has completed their signing.

If my client makes changes to a form, am I notified of the changes?
No. If you have elected to review the forms prior to submitting to Schwab, you have an opportunity to review the forms. However, once all signers have completed their signing, you are not able to edit any of the information.

Can I open a traditional IRA on behalf of a minor?
Yes. Refer to the How to open a custodial IRA page for more information.

What is the difference between a rollover IRA and a contributory IRA?
These names describe how the assets are deposited in the retirement account. A contributory IRA, also known as a traditional IRA, is generally opened as an account to make annual contributions. A rollover IRA is also a traditional IRA and is generally opened as an account to permit the tax-free movement of assets from a qualified retirement account, such as a 401(k). It is designed for individuals who have retired or terminated employment, or for employees whose company has terminated its retirement plan and who want to preserve the ability to roll these assets back into another employer plan at a later date.

What is the procedure when an IRA account holder dies?
If the IRA account holder dies, we need a Certified death certificate Tooltip  and a completed Inherited IRA Account Application/Distribution Election Form for each surviving beneficiary. The form will provide detailed instruction on how Schwab is to distribute the assets to the beneficiary. For detailed information, see Introduction to inherited IRAs.

How to add and update account beneficiaries
How to add features to an account
How to convert accounts
How to establish a Schwab MoneyLink® profile
How to handle deceased client's assets
How to open a custodial IRA
How to open an inherited IRA
How to open an IRA for international clients/residents
How to open a Roth IRA
How to open a SEP-IRA
How to open a SIMPLE IRA
How to roll over assets to a Schwab account
How to use digital onboarding
How to use DocuSign®
Introduction to custodial IRAs
Introduction to householding
Introduction to inherited IRAs
Introduction to Roth IRAs
Introduction to SEP-IRAs
Introduction to SIMPLE IRAs
Introduction to traditional IRAs