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What is the best retirement investment account for a construction worker? CD, IRA, Or Other??

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My husband and I are looking to start a retirement account, but I don't know much about CD's or IRA's. Can anyone help that speaks common english, instead of the banker talk?? Thanks

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  1. If your talking about retirement investment, I recommend the IRA, but not just any IRA, a roth IRA.  Suze Orman, a finance specialist recommends everyone opting for the type of retirement account because it is the best one.  It will be the best investment you will make for your retirement.


  2. Basically you need more money for a CD. They are safe but pay low interest and amount to little without big dollars. IRA can be a portfolio that can contain bonds which are like Cd's, mutual funds and stocks. You can gain in dividends and capital gains, however you can lose the value of the stocks/ capital gain which would be like losing some of the CD money. Changes are good you buy good stocks and mutual funds.

  3. An IRA and a CD are two completely different things.

    An IRA is an account, kind of an “umbrella” under which you can place virtually anything:  stocks, bonds, mutual funds, unit investment trusts, exchange-traded funds (ETFs), real estate investment trusts (REITs), and—yes—CDs.

    CD is an acronym for Certificate of Deposit.  I’ll come back to that in a moment.

    Returning to the IRA:  IRA is an acronym that stands for Individual Retirement Account.  You also will see it, rarely, written as Individual Retirement Arrangement.  So just from the name you can see that the answer to the question “what is the best retirement investment account, CD or IRA” is IRA.

    You also mention “other”.  If by “other” you mean that (and I’m assuming your husband is the construction worker) your husband is an employee of a company, and that company offers a retirement plan, then the general answer is YES, “other” is good!  Participate in the company’s retirement plan!  It helps in many ways, not the least of which is that the company will pull the investment in the plan out of your husband’s check before he gets it, so it forces the discipline of saving.  Very helpful.

    Let’s go back to the IRA.  Here’s how it works:  it’s a retirement account, which means you can put money in it IF you have earned income (like a construction worker), and the maximum you can invest if you’re under 50 is $4,000 per year.  If you aren’t covered by another retirement plan, generally that $4,000 (or however much you invest, up to the maximum of $4,000) is deductible from your income.  So in other words, if you earned  $36,000 and place $4,000 in an IRA, you pay tax on only $32,000.  This is an incentive to get you to save for your own retirement.

    The amount you place in the IRA, up to the maximum of $4,000, is invested inside the “umbrella” of the IRA and grows tax-deferred (a VERY big deal) until you withdraw it.  You cannot withdraw it without a penalty until the age of 59½.  Be sure you are prepared for that; this is NOT a savings account and you do not have access to this money without penalty (except in very limited circumstances) until you are 59½. This is to force the discipline of leaving it alone for retirement; again, it’s an Individual RETIREMENT Account.

    Now, today there is a different kind of IRA called a Roth IRA.  Ã¢Â€ÂœRoth” refers to the sponsor of the legislation that created this account, Sen. William Roth of Delaware.  There are two major differences between an IRA and a Roth IRA.  In the Roth, you receive no tax deduction on the amount you place into the IRA, and the money grows TAX-FREE.  Also a VERY big deal.  Again, this is NOT a savings account and you do not have access to this money without penalty (except in limited circumstances) until you are 59½.

    You might consider placing a total of $4,000 into IRAs per year, $2,000 into a regular IRA where you get a $2,000 deduction and the money grows tax-deferred, and $2,000 into a Roth where you get no deduction but the money grows tax-free.  That way you would get some benefits of both.

    So if you really want to save for retirement (and we all should), first participate in your company’s retirement plan, if any, then open IRAs.

    A couple of other points on IRAs:  virtually anywhere you set up an IRA, there is an annual fee for it.  Usually it’s $40 or $50 per year.  On top of that are fees, commissions, or charges for whatever you invest the IRA money into.  Sometimes you'll see or hear commercials or ads, or talk shows on radio, that say they charge no investment commissions--oh, but there's a fee.  Or there's no fee--oh, but there's a service charge.  There are ALWAYS fees/charges/commissions.  Nothing illegal or immoral about that; it's a business, just like construction work.

    Now, back to the CD.  A Certificate of Deposit is an investment that offers a fixed rate of interest (today 3.2% or so) for a fixed amount of time (3 months, 6 months, a year, two years, etc.).  You “buy”a CD usually in increments of $1,000; you can buy a $1,000 CD or a $5,000 CD, but not a $1,187 CD, in other words.  

    CDs are issued by banks.  You can buy one from any bank.  You can also go to a brokerage firm, like Morgan Stanley or Merrill Lynch, and buy a CD.  Those firms do not issue their own CDs; instead, they act as a go-between for you and CDs from banks all over the country.  In this way you have access to rates from all over the country, instead of hoping your local bank offers a good rate.

    A couple of other points:  If you buy a CD for a 3-month period and need the money in 2 months, there generally is a “penalty for early withdrawal.”  Generally the penalty is the interest you’ve earned so far.  At the end of the period (3 months, 6 months, etc.) the CD “matures” and you can either buy another one or do something else with the money.  Be careful, if you buy the CD from a bank, that the bank does not “automatically” reinvest into another CD.  Interest rates for CDs are quoted as an annual rate; 3.2% referenced above means the CD earns 3.2% per year.  If you buy a CD for 3 months, then, since 3 months is ¼ of a year, for a 3-month CD you earn ¼ of the rate, or in this example ¼ of 3.2%.

    Okay, so let’s put these two together.  You can open an IRA and deposit $2,000 into it.  

    With that $2,000 now in the IRA, you can buy a $2,000 CD for 6 months.  That’s one way to go.  Or you can buy mutual funds, or bonds, or stocks, or anything else.

    One more note about IRAs and CDs:  You can go to your local bank and tell the bank teller you want an IRA.  Generally the teller will give you some forms to sign and the IRA money will be automatically invested into a 1-year CD.  The bank representative will tell you there’s no fee for the IRA.  HOWEVER, the 1-year CD that’s in your IRA will earn less than a 1-year CD you buy outside your IRA.  So is there a fee?  Of course.  It’s built into the lower rate you get on your CD.  You just don’t see the fee.

    Hope this helps.  I tried to make it plain English!  Good luck.

  4. Safest is post office CD

    You may also opt for post office MIS.

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