ROTH IRA red up on it but still a little shaky on just how the money accrues. Thanks?

Answer 1

In any IRA, you pick different ways to fund it. You can choose mutual funds, stocks, ETFs and other things. Depending on how these investments do, you will gain (or even potentially lose) money.

So for example... let's say you put in $4k into your Roth IRA.

With that $4k let's say you buy a mutual fund (ABC) a stock (XYZ) and leave a little in cash.

Depending on how mutual fund ABC and stock XYZ does, the value of your Roth IRA will either go up or down. The amount you just leave in cash will accrue interest at whatever rate they determine (usually not that high).

Now, this means that in the short term, it is possible to lose money in your IRA, but generally a diversivied portfolio of stocks, mutual funds, bonds, etc... over a longer period of time (like until you retire) does much better than a savings account that gives just a fixed interest rate.

The great thing about a Roth IRA is that since you used already taxed money, none of the profit you get from the IRA will be taxed. With a traditional IRA, any gain you make with your investments will get taxed once you start withdrawing.

Answer 2

Not sure just what you are asking. Your Roth IRA money is invested in something, and with a little luck that investment grows. Could be interest if it's a CD, or dividends and stock price increases if it's in stocks.

It accrues tax-free.

Answer 3

Yiu sign up with some kind of an investment company like Fidelity or Vanguard. You fill out some paperwork to open the account. Thay send you a list of investments they have available like mutual funds. You talk to a friend that knows how to pick one or two with good records. You send the investment company the money with whatever form they gave you to fill out and tell them where to invest it. It stays there and earns money tax free until you retire. Then you take it out and don't have to pay any taxes on the profit.

Answer 4

Ideally, you open your Roth with a brokerage or mutual fund. And then you spread your money across mutual funds and/or stocks. The appreciation, capital gains, interest, and dividends is how your money grows.