Many people are preparing for retirement, but not everyone knows how to invest their money. In this blog post, we’ll look at the different IRA Investment Portfolios available and discuss some of the pros and cons associated with each one. We’ll also include a glossary of terms that might be unfamiliar to you and a list of helpful resources to learn more about this topic.
Investment Portfolio Options: There are countless IRA portfolio options to choose from, but we will focus on the two most popular and standard options.
The first is a Roth IRA (Individual Retirement Account), while the second option involves a traditional IRA (Individual Retirement Arrangement). They vary in taxation as well as contribution eligibility requirements.
What is a Roth IRA?
A Roth IRA (Individual Retirement Arrangement) is an investment portfolio that allows tax-free withdrawals as long as specific criteria are met. It can be opened with after-tax contributions or pre-tax contributions and offers many different types of investments such as stocks, bonds, etc.
What is a traditional IRA?
A traditional IRA is an investment portfolio that allows for tax-free withdrawals only after meeting specific criteria. It can be opened with pre-tax or after-tax contributions and offers many different investments such as stocks, bonds, etc. In addition, a Traditional IRA is tax-deferred, meaning you don’t pay taxes now but at the time of withdrawal.
Investment portfolios for a Roth IRA:
There are many different types of investments available in a Roth IRA. Some include stocks, bonds, mutual funds, and CDs (certificates of deposit).
Investment portfolios for a Traditional IRA:
As for the Traditional IRA, many of these same investment portfolios are also available. The main difference is that certain investments, such as mutual funds and stocks, can’t be held in a tax-deferred account as they can be with the Roth IRA.
An important distinction to make here is between pre-tax contributions versus after-tax contributions. Traditionally, IRAs allowed for pre-tax contributions to help lower your taxable income at the time of withdrawal, while Roth IRAs only required after-tax contributions. However, recent changes have decreased some of these restrictions. In addition, particular investment portfolios allow you to make either type of contribution with either account type (Roth or Traditional), which can help you save even more money.
If you’re looking to invest some of your retirement savings, make sure you understand the different investment portfolios available and how they work. There are plenty of options, so don’t be afraid to shop around before committing to one in particular.