IRA Definition

An Individual Retirement Account (IRA) is a personally funded retirement savings vehicle. You invest your own money to save for your retirement. You can have a traditional IRA (tax deductible) or a Roth IRA (not deductible, but offers tax-free growth).

Types of Investment Vehicles

Regardless of which type of IRA you select, you may also select how your contributions are invested within your IRA. Financial advisors suggest a balanced portfolio including stocks, bonds, CDs and money markets.

Money Market

You can set up a money market account for your IRA investments. Money markets act like regular savings accounts, but usually earn higher interest. Financial advisers consider them the safest investment vehicle.

Benefits

In addition to security (no loss of your contributions), money markets are also backed by the Federal Deposit Insurance Corporation (FDIC). Your account is insured for up to $250,000 per account, per qualified institution. Stock- or bond-based accounts are not covered by the FDIC.

Considerations

While the money market IRA is a safe investment, the growth of your money can be limited. You may want to diversify your IRA into different types of investment vehicles. While investing in stocks or bonds is not risk-free, your long-term return on your money is generally much greater than with a money market investment.

Source:

MoneyRates: IRA Money Market Accounts: Good and Safe; Andrew Freiburghouse