Investing Tax Free

Individual Retirement Accounts (IRA)

Individual retirement accounts or IRAs are retirement accounts that offer great tax benefits for investors saving for retirement. All investments in IRA accounts grow tax deferred or tax free. That means, you can buy and sell any investments in your IRA account as often as you like and you won't have to pay any capital gains taxes on the gains. The tax benefits of investing within an IRA account is similar to tax benefits you get from investing in municipal bonds.

Should I invest in municipal bonds in my IRA?

Most of the time, investing in municipal bonds in an IRA is a waste of tax benefits because investments in an IRA are not taxed anyway. Investments in an IRA are tax deferred investments.

Types of IRAs

There are many types of IRA accounts. There are IRA accounts for individuals, IRA accounts for businesses and IRA accounts for employees. Because of the great tax benefits of an IRA, there are many rules that you have to follow concerning the setting up of the IRA, contributions, distributions and more. See tax deadlines for a guide of when you must set up an IRA by as well as contribute or distribute.

IRA for individuals

There are three classifications of Individual Retirement Accounts (IRA) for individuals.

Important things you need to know about IRA Rollover
  • First, your 401k may contain both PRE-TAX and AFTER-TAX money. The Pre-tax money should go into a Traditional IRA and the after-tax money in the Roth. However, you can open just one IRA account and keep the money mixed. But, remember to keep track of which money you already paid taxes on and always bring it up when your accountant is doing your books.


  • Second, when you leave your job, you should ensure that the company does not cut you the retirement check by calling them and express your intention to either leave the retirement with the employer for the time being or provide the name of the financial institution where you set up an IRA account to rollover into.


  • 401k is less flexible than IRA. The investment choices within a 401k are far less than those in IRA s. If you already leave your job, you should think about setting up an IRA.