IRA’s are Accounts, Not Investments

by Dual Income No Kids on August 28, 2008 · 0 comments

Hi All,

This posting is to clear up a common misconception about Individual Retirement Accounts (IRAs).

IRA’s are not investments, instead they are accounts. Essentially they are containers that can help you avoid income taxes on your investments until you begin to take your money out at retirement. In your IRA you can buy pretty much anything you want; stocks, CDs, bonds, etc.

How to they work? Well, you essentially open up an IRA in the same way you would open up a checking account. Then you make a deposit into the IRA – not more than $5,000 in 2008. After your deposit clears, usually less than three days, you can invest in anything in the institution managing your IRA can offer you.

The great thing about IRAs is they allow tax deferred profits. That means you can avoid taxation on any capital gains – That is, if you buy and sell a stock or a mutual fund, you don’t have to pay taxes on the profits.

Best,

James

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