Confused about IRAs

[prog]

My bank is being zzz-slow getting back to me with a time-sensitive question I have about IRAs, so I thought I'd turn to LazyWeb.



I wanna make my third annual last-minute $3,000 (legal maximum) IRA contribution, as the IRS smiles upon such things. Right now my bank shows me holding two IRA accounts: a traditional one I started two years ago, and a Roth I opened last year because it seemed like a better idea.

Each account contains one (1) CD. I want to put my $3,000 into my Roth IRA account. And here is where i get stuck.

My bank's Web interface isn't letting me treat my CDs like regular bank accounts. (There is probably an excellent reason for this. I don't know what it is, because I don't know anything about any of this.) So, the way to make my contribution does not seem as simple as transferring the money from my savings account to that Roth CD.

I can buy a new Roth CD, and just put it alongside the one I got last year. So is that what IRA accounts are made of? An array of distinct CDs, one for every contribution made?

This would imply that as the years pass I'm going to own an ever-growing collection of CDs, each worth $(whatever the legal contribution max was when it was opened) + $(interest it has accrued since it was opened). Is that right? It seems weird.

Comments

[magid.livejournal.com]

A Roth IRA is just another account that happens to be post-tax for investing, and tax-free for earnings. You can invest what's in the account in a CD (as you have), or in stocks, or in any other investment. And I believe that CDs aren't like bank accounts, in that you buy one for $x (face value) at a particular time, and the rate of return may vary depending on the $ you put in at once. If you choose to invest only in CDs, then, yeah, you'll end up with a number of CDs at the end (note, though, that depending on the duration of the CDs, you could put together a new contribution with the funds coming out of another CD that's maturing, and buy one with a higher face value).

[poeticserenity.livejournal.com]

You have a couple of options w/ your contribution. You can create a new cd or if your current cd will be maturing soon, you can place your 3000 contribution (btw the limit for 2005 is 4000 and you can actually make 2004's up until 4/15/05) into a money market account. When the cd matures you can have them combined.
However if your current roth cd doesn't mature for another year then i wouldn't recommend the mma, due to low interest. Place the contribution for 3000 into a 1 year cd so that they can be joined together at a later date.
All an ira acct is , is a basket that holds different investments. So you can have as many or as few cds, as you'd like. However to join a contribution w/ it, you would need wait for one to be mature.
As far as not being able to do it from the savings. Most branches have no clue about iras, ask your bank if they have a retirement services department or ira department that you can call. the will be able to give you the correct explanation w/ your options for contributions.
Hope this helped.

[leighjen.livejournal.com]

This is not advice for this year since you should be comfortable with any investment you make, and really, financial advice over the internet is no substitute for doing in-depth research on your own...That is my disclaimer and I am sticking to it.

You might want to look into more aggressive savings vehicles. There are lots of options out there and you can put lots of things into an IRA. You are not limited to CDs. And you don't have to go through your bank to get one. I invest directly with Vanguard (www.vanguard.com) but you can use any number of financial companies.

ps

[magid.livejournal.com]

This article describes the differences between an IRA and what you have in the IRA fairly clearly.