Saving for retirement is one thing that just about everyone will agree is important. There are a plethora of Roth IRA investments available from which to choose so it is crucial that you take a few things into careful consideration before deciding to invest in one account over another. Each type of investment will require varying degrees of management and monitoring as well as have a wide range of associated market risk.
There are two basic forms of IRAs; a traditional IRA and a Roth IRA. A traditional IRA is an account where contributions are made with pre-tax dollars. What this means is that your taxable income is reduced by the amount of money you contribute to your IRA within any given year. As the contributions are not taxed prior to being added to your retirement account you will have to pay tax on any appreciation that your funds may make when you begin withdrawing it at retirement.
Roth IRAs were introduced as a way to encourage more people to invest in their futures. Contributions made to these accounts are made with after-tax dollars. What this essentially means is that since you are taxed before adding the funds to your account you will never be taxed on the funds when you withdraw them. Furthermore, you will not be taxed on the appreciation of these funds as long as you wait until the proper age to begin your withdrawals.
The type of Roth IRA investments that you can make is rather broad. As you open your account you should consider whether or not you want to actively manage your portfolio or not. Self directed IRAs are fascinating accounts which allow for a wide range of investment options, including selling covered calls. Additionally, when you are actively managing your own retirement account it is possible to invest in industries and companies where you have more knowledge or interest. If, however, you have never managed your investments before it would be wise to simply invest in mutual funds or an IRA certificates of deposit.
Ultimately, the decision on what type of investments you want to invest in is a matter of personal choice. It is important that you weight such factors as your tolerance of risk, your overall investment goals and objectives, and your estimated needs at retirement before selecting from any of these Roth IRA investments.