Please tell me the pros and cons of each. Thanks.
2006-09-18 07:58:46 · 9 answers · asked by NavyBrat 4 in Business & Finance ➔ Investing
As other responders have advised, an IRA is a type of retirement account. Now to answer your question. A Ross IRA allows you to earn on your investments without ever having to pay taxes, ever. That is a great advantage. A traditional IRA allows you to defer taxes and deduct the contribuitions from your taxable income, also an advantage, but in my opinion not so much an advantage as that offered by the Ross IRA. There is a big difference between deferring taxes and not ever having to pay taxes.
Now with both types of IRA accounts, one of the investments you could make is to place your money within the IRA account into CD's. There are many other options available.
2006-09-18 09:08:00 · answer #1 · answered by Anonymous · 0⤊ 0⤋
This is like asking if you like apples or oranges.
The answer depends on what you are looking for in an investment. If you are investing for retirement, then you should put your money into an IRA. There is a huge tax advantage to it. If you are investing for a long time, then you ought to put most of that money into securities that have more risk (and more reward) than CDs.
On the other hand, if you need cash in six months or a year, then putting your money into an IRA is a monumentally stupid idea. The CD will be very safe, and provide you with liquidity when you need it.
2006-09-18 16:24:42 · answer #2 · answered by Ranto 7 · 0⤊ 0⤋
An IRA is for retirement savings. It allows your contributions to accumulate interest tax-free until you withdraw it, after age 59 1/2. This means you will probably be taxed less on your withdrawals. With current tax law you may be able to get up to $100 CREDIT ON YOUR TAX BILL for an IRA contribution - a great way to reduce your current taxes! Except for certain conditions, an early withdrawal has a 10% penalty plus being taxed. The IRS has a good web site. Withdrawals from a Roth IRA are tax free. A CD is a way of usually getting a better interest rate on savings. You can have a CD in an IRA.
Some good info is here- http://www.irs.gov/pub/irs-pdf/p17.pdf
2006-09-18 15:47:40 · answer #3 · answered by curious george 5 · 1⤊ 0⤋
Brief, quick answer:
Over the long term an IRA is a better investment.
CD
-very, very low risk
>low return on investment
IRA
-higher risk
>higher rate of return
>many, many investment options
If this is for retirement in the distant future, an IRA is MUCH better than a CD.
CDs are for places to put cash in the short-term or for people who are retired or very close to retirement to put their money.
2006-09-18 15:22:11 · answer #4 · answered by Zak 5 · 0⤊ 0⤋
Listen to Cristy. An IRA is an investment account. A CD is an investment instrument.
2006-09-18 15:43:22 · answer #5 · answered by Anonymous · 0⤊ 0⤋
IRA is not an investment, it's a type of tax-advantaged account you open with brokerages or mutual fund companies. You can put a CD into an IRA if you need to...
2006-09-18 17:06:07 · answer #6 · answered by NC 7 · 0⤊ 0⤋
Well, IRA is not an investment per se, it is a retirement account which can hold the investments you put in it - stocks, bonds, mutual funds, CDs etc.
Therefore these two are not comparable.
2006-09-18 15:03:28 · answer #7 · answered by Kaytee 5 · 1⤊ 0⤋
this all depends on how you wish your money to work for you. You really should be asking, which is better, a voluntary account or a Roth IRA? The difference between these two is if you need the money for retirement or if this is money you will need to access before retirement?
2006-09-18 15:25:00 · answer #8 · answered by Anonymous · 0⤊ 0⤋
1) IRA
2) You make more money.
I suggest you to stay way from CDs.
Top 5 Answerer in this category.
2006-09-18 15:39:41 · answer #9 · answered by Anonymous · 0⤊ 1⤋