Account Types In The US
The range of trading accounts available to US investors differs from those available to traders based elsewhere. The growth of online investing in recent years has meant that more people than ever are trading. But with more options to choose from, it can be tricky to discern which account is right for you.
In this guide, we break it all down for you. From Reg T and Portfolio Margin, to 401ks, pattern traders and retirement options, we unpack US definitions and outline exactly what each account has to offer.
Top US Trading Accounts
Margin Accounts
When it comes to US margin account types, traders have two options:
- Reg T
- Portfolio margin
Reg T
Regulation T, commonly known as “Reg T”, governs how much credit securities brokers and dealers can extend to their customers in the US.
The initial margin requirement for the purchase of stocks under Reg T is 50 percent, or up to 2x the equity value of the account.
This means that under Reg T, a trader must purchase at least half the securities in the account with cash while half can be purchased on margin.
For example, if a trader wants to buy 100 shares of a $50 stock ($5,000 total purchase), under Reg T they are able to buy half of that with cash ($2,500) and the other half with money borrowed from the broker ($2,500).
Importantly, margin accounts can expose traders to the loss of capital beyond their own equity. Trading with leverage (successfully) requires expertise and for that reason, many brokers will require funding minimums to open and maintain a margin account. Requirements will vary by broker.
In practice, FINRA Rule 4210 sets a minimum equity requirement of $2,000 to open or maintain a margin account. And, once an account is open, brokers enforce an ongoing maintenance margin requirement of at least 25% of the account’s total equity value. Many brokers impose higher maintenance margins (30%, 40%, or more) at their discretion, depending on the volatility of the securities held.
If your account equity falls below the maintenance margin threshold, your broker will issue a margin call, requiring you to deposit additional funds or liquidate positions.
Portfolio Margin
Portfolio margin is a risk-based margin system available to qualifying US investors. To be eligible, brokers usually require at least $100,000 in account equity.
The basic standards applied by FINRA require at least $100,000 in equity for customers of brokers that have intraday real-time monitoring systems. This increases to at least $150,000 for customers of brokers without intraday real-time monitoring systems. For prime brokerage customers, or for introducing brokers who execute clients’ trades away from the clearing firm, at least $500,000 in account equity is required.
On Interactive Brokers, for example, if a US trader has at least $110,000 in account equity, they are eligible to apply for a portfolio margin account. To maintain eligibility, account equity must not drop below $100,000. Again, requirements may vary between brokers,
Portfolio margin aims to give more sophisticated traders the ability to better align margin requirements with the risk profile of the portfolio.
Typically, portfolio margin allows for a higher leverage capacity relative to traditional Reg T requirements. Portfolios that are better diversified or maintain hedged trade structures can often reduce their margin requirements to less than 15 percent. This means traders may have the opportunity to leverage their portfolios at 6x or more under portfolio margin.
Portfolio margin is based on the Options Clearing Corporation’s (OCC) TIMS methodology. This works by setting the margin requirement to the maximum loss of the portfolio when stress-testing the allocation across a host of various hypothetical moves in the underlying markets.
The market move simulated depends on the nature of the underlying instrument(s). The full list can be found on the OCC’s website.
- “High capitalization” Broad Based Indices are simulated over a -8 percent to +6 percent price range
- “Non-High Capitalization” Broad Based Indices are simulated over a -10 percent to +10 percent price range
- Sector indices are simulated over a -15 percent to +15 percent price range
- Individual equities are also simulated over a -15 percent to +15 percent price range
- Leveraged ETFs and inverse ETFs will be bucketed according to where they fall above (i.e., sector or broad based) and multiplied by their stated leverage. For example, if the ETF follows a particular sector and is leveraged 3x, then it will be simulated over a -45 percent to +45 percent price range. (And would therefore face margin requirements comparable to or higher than standard Reg T in many cases).
Once the profit and loss scenarios are taken across each group of instruments, “offsets” are then applied to determine the final margin calculation. Offsets are set by the OCC and measured based on the degree of correlation between securities.
There are more than two dozen product offset groups and each has its own offset percentage. For example, a profit in a NASDAQ ETF can help offset the loss in a S&P 500 ETF since both represent the same asset class.
Single stock positions that don’t qualify for index inclusion do not receive the benefit of any profit/loss offsets. This means a portfolio of single stock positions must maintain a minimum margin requirement of 15 percent.
After the offsets are applied, the profit and loss estimates can be determined based on each market move to set the margin requirement, which is updated dynamically in real-time.
Pattern Day Trader Account
A pattern day trader is a special FINRA designation when the following conditions are met:
- The trader executes four or more day trades (i.e. buys and sells securities intraday) within five business days
- Trades in a margin account (cash accounts are not eligible)
- Such trades are more than six percent of the customer’s overall trading activity over the measured five-day period
If a trader meets these conditions, they have to maintain an equity balance of at least $25,000 (maintaining a balance above a certain threshold is used as a proxy to denote a trader’s level of sophistication). For the official FINRA definition and current rule status, see FINRA’s day-trading rules.
The Pattern Day Trade rule is in place to discourage investors from trading too frequently. If the amount of equity in the account drops below $25,000 then the trader can no longer execute day trades until the equity balance is brought back above that level.
A pattern day trader is also eligible for lower margin requirements than the standard 50 percent provided by Reg T.
For example, if an investor under the Pattern Day Trade rule has an account equity value of $50,000, then they are eligible to purchase up to $200,000 worth of stock. This is higher than the normal $100,000 that could be executed under traditional Reg T rules.
If the value of these stocks increases by two percent in one day, they would be eligible to gain eight percent due to the greater margin availability (not factoring in margin costs accrued on that particular day).
Accordingly, the pattern day trader designation can be attractive for certain investors. Nonetheless, the extra leverage cuts both ways and can lead to higher potential returns but also greater potential losses.
Retirement Accounts
A retirement account often serves as part of a broader retirement plan that allows an investor to replace their employment income upon retirement.
These accounts may be set up individually or by employers, unions, the government, insurance companies, or other institutions.
To encourage responsible investing and retirement planning, some national governments have sponsored tax-deferred or tax-exempt plans.
In the US, the most popular options include the 401(k) and Individual Retirement Account (IRA).
We’ll briefly cover the major plans below:
401(k)
The 401(k) is the most popular defined-contribution pension account in the US.
Retirement savings are provided by an employer after deducting them from an employee’s paycheck before taxation. Accordingly, these savings are tax-deferred until withdrawn after retirement. As a perk, some employers will match employee contributions up to a certain percentage.
Individuals can contribute an amount of their pre-tax earnings that’s set by the IRS and adjusted periodically according to the annual cost-of-living adjustment (COLA); in 2025 this reached $23,500.
Traditional IRA
Contributions to the traditional IRA are made with pre-tax assets and are typically tax-deductible. Transactions and earnings (i.e. dividends, interest, capital gains) within the IRA have no impact on tax outcomes.
Withdrawals upon eligible retirement age are taxed as ordinary income, with “retirement age” considered the year in which the taxpayer turns 59-1/2 (otherwise a 10 percent penalty is applied to any withdrawals).
In the UK, the Individual Savings Account (ISA) is is a broadly similar tax‑advantaged savings wrapper, but it works more like a Roth IRA (post‑tax contributions, tax‑free withdrawals) than a traditional IRA.
Roth IRA
Contributions are made with after-tax assets. Withdrawals are normally tax-free.
For 2025, individuals can contribute up to $7,000 annually to traditional and Roth IRAs combined, or $8,000 if age 50 or older. These limits are adjusted annually by the IRS for inflation.
Individuals who make beyond a certain amount of money per year are not eligible to contribute to a Roth IRA. For 2025, full Roth IRA contributions are allowed below $150,000 of MAGI for single filers and $236,000 for joint filers; above these levels, contributions are phased out and then disallowed at higher incomes. These thresholds are adjusted over time, so check current IRS guidance.
SEP IRA
SEP IRAs are used by business owners to offer retirement benefits to themselves and their employees. They are commonly used by self-employed individuals with no employees as the administration costs are minimal.
For any business owner with employees, each individual employee must receive the same benefits as directed under the SEP plan.
SEP accounts are treated the same as IRAs, and therefore funds can be invested the same way as for an IRA. They allow for retirement contributions made in an employee’s name rather than the extra administration involved in setting up a pension fund in the company’s name.
Other popular account types in the US include:
- Roth 401(k) – Introduced in 2006, the Roth 401(k) is basically a 401(k) with the tax features of a Roth IRA
- 403(b) – A 403(b) is similar to the 401(k), but is reserved for certain entities, such as religious institutions and non-profit workers
- 401(a) And 457 Plans – Applies to employees of state and local governments and certain tax-exempt organizations (i.e., non-profits)
- Keogh Plan – Also known as the HR10, this provides a pension plan for self-employed individuals
- 529 Savings Plan – A tax-advantaged savings vehicle designed to save for future educational costs
Final Word
Trading accounts in the US are heavily regulated and differ from those available in other major investing hubs. Ultimately, which account is best for you will depend on your available capital and objectives, for example, long-term investing for retirement versus short-term, day trading.
Use our guide to find the right account type for your needs and see our list of top brokers to start trading today.
FAQs
Is The US A Heavily Regulated Market?
Yes. The US financial markets are regulated by multiple agencies working in concert: the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), the Commodity Futures Trading Commission (CFTC), state regulators, and self-regulatory organizations (SROs) like the exchanges. This multi-layered oversight creates transparent disclosure requirements, prevents market manipulation, enforces investor protection rules, and ensures broker solvency—making it one of the world’s most secure trading environments for retail and institutional investors.
Why Are Account Types Different In The US?
US trading is authorized and regulated by the Securities and Exchange Commission (SEC). The body exerts influence over what is made available as well as the terms and conditions of the proposition. Their jurisdiction covers the US only. Other countries have their own regulatory bodies whose influence differs.
Is A 401k A Retirement Account?
Yes, a 401k is the most popular defined contribution pension account available today in the US.
How Much Leverage Can I Get With A Portfolio Margin?
Portfolio margin, leverage of 1:6 or more is available. While margin requirements of Regulation T are generally limited on equity to 1:2.