An E*TRADE Roth IRA has no account minimum, charges $0 on stock and ETF trades, and is one of the few brokerages that lets you trade options (covered calls, cash-secured puts) inside an IRA account. The 2026 contribution limit is $7,000 per year ($8,000 for those 50 and older), and all qualified withdrawals in retirement are completely tax-free. Active investors who want to generate options income in a tax-free environment will find ETRADE — with the Power ETRADE platform — among the best Roth IRA choices available.
2026 Roth IRA Contribution Limits
| Filing status | Full contribution | Phase-out range | Above limit |
|---|---|---|---|
| Single / Head of Household | Under $150,000 MAGI | $150,000–$165,000 | Backdoor Roth only |
| Married Filing Jointly | Under $236,000 MAGI | $236,000–$246,000 | Backdoor Roth only |
| Married Filing Separately | Under $10,000 MAGI | $0–$10,000 | Backdoor Roth only |
| Age | Annual contribution limit |
|---|---|
| Under 50 | $7,000 |
| 50 or older | $8,000 (includes $1,000 catch-up) |
Limits apply across all your IRAs combined. The deadline to contribute for the 2026 tax year is April 15, 2027.
Why Choose an E*TRADE Roth IRA?
E*TRADE’s differentiating features for Roth IRA investors:
Options strategies in an IRA: E*TRADE permits covered calls and cash-secured puts inside a Roth IRA. This is significant — these strategies generate premium income that, inside a Roth, is permanently tax-free. A covered call generates income from a stock you already own; a cash-secured put generates income while you wait to buy a stock at a lower price. Neither strategy is available in all brokerages’ IRA accounts.
Power E*TRADE platform: E*TRADE’s Power E*TRADE platform provides institutional-grade options analytics, live action scanners, and paper trading — all accessible inside a Roth IRA. This is particularly useful for options traders who want to practice strategies before committing retirement funds.
Core Portfolios in IRA: For investors who prefer a hands-off approach, E*TRADE Core Portfolios (0.30%, $500 minimum) is available inside a Roth IRA. It auto-builds and rebalances a diversified ETF portfolio. A socially responsible investing option is included at no additional cost.
24/7 customer service: E*TRADE’s customer service is staffed by live agents around the clock — useful if you have a time-sensitive question about an options position or a pending conversion.
Options Trading in a Roth IRA: The Tax Advantage
Normally, options premium income is taxed as short-term capital gain (ordinary income rates). Inside a Roth IRA, that income is tax-free.
Covered call example: You hold 100 shares of Apple in your E*TRADE Roth IRA. You sell 1 covered call contract and collect $200 in premium. In a taxable account, that $200 would be taxed at your ordinary income rate (e.g., 22% = $44 in taxes). In your Roth IRA, you keep the full $200 — permanently tax-free.
Over years of consistently writing covered calls, the tax-free compounding inside a Roth IRA can meaningfully increase your retirement wealth compared to running the same strategy in a taxable account.
Approved IRA options levels at E*TRADE:
- Level 1: Covered calls, cash-secured puts (available in IRA)
- Level 2: Long calls, long puts (available in IRA)
- Level 3: Spreads (availability may vary for IRAs — check with E*TRADE)
- Level 4+: Naked options (generally not permitted in IRAs due to unlimited loss potential)
Roth vs. Traditional IRA at E*TRADE
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Tax on contributions | Paid now (after-tax) | Pre-tax (deductible) |
| Tax on withdrawals | $0 (qualified) | Ordinary income |
| Income limits | Yes — $150K–$165K single | No (deductibility has limits) |
| RMDs at age 73 | None | Required |
| Options strategies | Yes (approved levels) | Yes (approved levels) |
| Best for | Tax-free growth; younger investors | Current-year tax deduction |
The 5-Year Rule
To withdraw Roth IRA earnings tax-free, two conditions must be met:
- You must be at least 59½ years old
- The account must have been open for at least 5 tax years
The clock starts January 1 of the first year you contributed. Contributions (not earnings) can be withdrawn at any time with no tax or penalty.
What to Invest in an E*TRADE Roth IRA
| Investment | Why it works in a Roth |
|---|---|
| Low-cost ETFs (VTI, SPY, IVV) | High growth, tax-free compounding |
| REITs (VNQ, SCHH) | High dividend yield — tax-free in Roth |
| Covered call strategy (ETFs + options) | Premium income permanently tax-free |
| Core Portfolios (0.30%) | Automated ETF management, SRI option |
| Growth ETFs (QQQ, VUG) | Higher expected return = more Roth benefit |
Note on E*TRADE’s $75 ACAT-out fee: If you open a Roth IRA at ETRADE and later want to move it to Fidelity or Schwab, ETRADE charges $75 to transfer. Many receiving brokerages will reimburse this fee, but it’s worth knowing before committing. See E*TRADE fees for the full fee schedule.
Backdoor Roth IRA at E*TRADE
For income above $165,000 (single) or $246,000 (married):
- Open an E*TRADE Traditional IRA — no income limit on contributions
- Make a non-deductible contribution — up to $7,000 / $8,000
- Let the funds settle (1–2 business days; leave uninvested)
- Convert to Roth IRA — log in to etrade.com → Accounts → [Traditional IRA] → Convert to Roth IRA
- File IRS Form 8606 with your tax return
Pro-rata rule: If you hold other pre-tax Traditional IRA assets at E*TRADE or elsewhere, a portion of your conversion will be taxable proportional to the pre-tax balance. Consult a tax professional if this applies.
How to Open an E*TRADE Roth IRA
- Go to etrade.com → “Open an Account” → “Roth IRA”
- Provide personal information and Social Security number
- Apply for options trading (Level 1 for covered calls/puts in an IRA) — recommended at account opening
- Link a bank account for funding
- Contribute up to $7,000 for the 2026 tax year (deadline: April 15, 2027)
See the full E*TRADE IRA guide for Traditional IRA and rollover details, or the Power E*TRADE guide for the full options trading platform breakdown.
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy