Sunday, July 25, 2010

Can I Buy Stock With My Roth IRA

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Today I wanted to talk specifically about a question my friend asked me today which was can I buy stock with my Roth IRA. The answer is yes. A Roth IRA is just a special type of account arrangement with special tax treatment. While you can buy stocks in it, you can also use other types of investments to fund it. Using stocks makes sense though because you can shelter the gains from taxes as the interest grows tax free. It's a common question that doesn't surprise me. I know that when I worked at a bank a lot of people did buy cd's to put in their IRA's so I didn't really know that way back then either.

The key to how to buy stocks in your Roth IRA starts when you open your account with the broker. Before you can invest in the market, or any other type of investment, you have to choose your account type. And, that's really how simple it is. Once your account is opened, it works and functions just like any other brokerage account. It's just treated different for tax purposes.

That's why it's important to remember that you want to keep track of stock market investing contributions to your Roth separately from your other accounts. That's because it's different kind of money from your regular brokerage account. Because the tax consequences on Roth's are different, you want to treat it different as well.

Since the tax laws change all of the time and this post would quickly become out of date, I am not going to talk about the tax issues here, but rest assured you can buy stock in your Roth IRA. For more information about buying stocks though, you might check out my Ultimate Buying Stocks Guide.

Good luck investing!

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