The Difference Between Investments and Roth IRAs

Q. Dear Jeff,

I wrote to you about a month ago asking about more details regarding EIA's and you encouraged me to read your articles-which I did. I have $11,000 in a Roth IRA with my credit union which earns a 2.2% interest rate. I have been researching rolling over my current Roth IRA into a #### account which may invest a bit more aggresively than my credit union. However, there are all types of retirement accounts through #### and I'm more confused than ever. Should I just roll over my account into another Roth IRA? What would the benefits of this be? Or would a #### Target Retirement Fund be better?

I'm looking to earn a bit more interest on my account. Any advice you can give me would be much appreciated. Thank you so much. I really enjoy reading your weekly newsletter!


A. It's good to hear from you again.

I think your difficulty comes from confusing the difference between a type of account and an investment.

A Roth IRA is not an investment, it is a type of account. You can own just about any investment within a Roth IRA. This issue is confused because some banks and credit unions refer to a Roth IRA that is invested in a CD as a Roth IRA. It's not. The Roth IRA is the type of account at the bank. The CD is the investment within the Roth IRA account.

Think of the Roth IRA as an umbrella that shields the investments underneath it from the rain of the tax-man. The R-IRA is just a wrapper. By itself it does nothing.

The #### Target Retirement Fund is an investment. You can invest money from whatever type of account you have in the #### Target Retirment Fund.

The #### Target Retirment Fund could be fine because it allows others to make the decisions of how much should be in each category, freeing you up.

Your posted comments on this and other questions are welcome.
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