why do brokers consider retirement accounts unmarginable?
In this case, it's not the brokers, but rather is the IRS that's setting the policy, at least indirectly. Your brokers are only extending the general principle of law ("you can't borrow against your retirement savings") to a further conclusion ("you can't do the things that normally require margin in any retirement account, period").
To expand slightly: the basic principal is that your retirement assets are a very different animal than your regular, non-retirement savings. You voluntarily socked them away in exchange for Uncle Sam giving you a big (and immediate) tax break; in return for taking that tax break, you essentially agreed to follow the rules Uncle Sam set out for what you can and can't do with those assets after that. (If you didn't like the rules, it was your choice not to put the money in your IRA...the IRS doesn't hold a gun to your head and make you put the money in...that's the job of Social Security. :) One of the obvious rules Uncle Sam has set is that you can't take the money out of your account any time you like - you have to wait for retirement. An immediate corrolary to this idea is that retirement assets can't be lent or borrowed against in any way - otherwise, you could presumably take out a simple loan with the full balance of your IRA as collateral, and then have your retirement assets taken away by the bank if you defaulted. If you can do that, what's the point of calling them "retirement funds"?
From this, it's obvious that using retirement funds as collateral against a margin loan isn't playing by the rules. So retirement accounts can't be margin(able) accounts, and therefore almost all brokerages prohibit in them the kinds of transactions that traditionally require margin to undertake - like selling short, writing naked puts, or setting up credit put spreads.
Now technically, a brokerage doesn't need a margin account to do these things - they just need you to deposit the amount of cash in your account equal to what they perceive their maximum risk to be, and not touch it. That's why, technically, a brokerage _can_ allow you to write cash-secured naked puts in an IRA - and a very few (Jerrold and Co, IIRC?) do allow just that.
I hope this explains things a bit better.
-Rose- |
