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What does it mean for a ROTH IRA to have a 60 month certificate?

Thanks,
JP
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Greetings JP,

What does it mean for a ROTH IRA to have a 60 month certificate?

My guess is that the investment is some form of CD for 5 years. CD being a Certificate of Deposit and can commonly be found at banks, credit unions and similar institutions. The Roth IRA simply means the type of account that offers this certificate though I suspect there are similar ones for other types of accounts.

Regards,
JB
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Thanks JB,

Forgive my confusion. A couple of years ago I was give a monetary gift to open a ROTH IRA account. I had heard of the ROTH, but didn't really know anything about it. I did have a 401k at work and thought it was basically the same thing.

So, I went down to my credit union with my check for 2k and told them I wanted to open a ROTH IRA account. No problem, they said, this is what you want, blah, blah. And I ended up with this 5 year CD.

The money has just sat there until now, when I've started getting serious about investing and looking at what I have. So, do I even have a ROTH account or just this CD? Is this just one way to deposit money to a ROTH?

I thought ROTH accounts were like 401K accounts where you invested in certain mutual funds.

Any enlightenment whould be appreciated. Sorry to be so long winded.

Thanks,
JP
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The money has just sat there until now, when I've started getting serious about investing and looking at what I have. So, do I even have a ROTH account or just this CD? Is this just one way to deposit money to a ROTH?

I thought ROTH accounts were like 401K accounts where you invested in certain mutual funds.


You have a Roth IRA that contains a 5-yr CD. Roth IRA's, like any other IRA, can contain various investment vehicles. If you have it at a bank, then it will contain banking products and the money could be in a regular savings account, a CD, or a money market, but all of those would be held within the Roth. For example, my kids each have a Roth IRA. My son has his money in a straight savings account because he hasn't made the minimum yet to move it to a money market for higher interest, but it's still a Roth. My daughter has her Roth money in a money market for the higher interest rate. Once they have something more substantial, they will transfer the money to a brokerage and begin to buy stocks, but all of that will still be within the Roth IRA account.

You can also have stocks, bonds and mutual funds in a Roth or Traditional IRA. The point is that the investments are held within the Roth and are subject to the rules of the Roth, but whether or not an account is a Roth IRA is not determined by the types of investments that are in it.

Think of it like a giant file cabinet that is the IRA. In the file cabinet, you have drawers where one is bank accounts, one is stocks, and one is mutual funds. In the bank account drawer, you have a file folder for savings account money, a file folder for money market funds, and a file folder for CD's. In the stock drawer, you have individual stocks like Intel, IBM, GE, or whatever you like. In the mutual fund drawer, you have a file folder for Vanguard and it contains things like their index fund and other funds. You also have a folder for Fidelity and their Magellan fund, their index fund, their Windsor fund, etc.

The IRA is just the place it is all collected.

If you want to do something other than a CD with your Roth money, then do not roll it over into another CD when it comes due. Let it go to cash in a savings or money market, and then you could transfer the account to a brokerage where you could buy whatever you want in the Roth.

Does that makes sense?
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Greetings JP,

So, do I even have a ROTH account or just this CD?

You have a Roth account. In this account is the CD. Just like in my Roth account I have a couple of mutual funds and others can have all kinds of other things.

Is this just one way to deposit money to a ROTH?

No, but generally you contribute cash to a Roth but you can convert a Traditional IRA to a Roth IRA or transfer a Roth account from one custodian to another. The custodian is the company that is supposed to keep an eye on your IRA.

I thought ROTH accounts were like 401K accounts where you invested in certain mutual funds.

No, no, no. 401ks are employer sponsored plans with limited choices. Roth IRAs can be opened at various institutions including banks, credit unions, fund companies, brokerages and a few other places I think. Next year there is something called the Roth 401k which may lead to more confusion.

Regards,
JB
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2gifts and JB,

Thanks! That is exactly the explanation I needed. It makes total sense now. I really appreciated it.

JP
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