9 common misconceptions about IRAs
You invest in an IRA
It may be a matter of semantics, but saying you're invested in an IRA is a bit like saying you're invested in a joint account. An IRA is an account registration, not actually an investment. It's like the shell that houses a peanut; you don't eat the shell, you eat the nut. Likewise, you don't invest in an IRA; the investments are within it.
"IRA is simply a label applied to an account. That label gives it the special tax treatment. Inside the account, you will find the investment or investments," says Certified Financial Planner Rick Salmeron, founder of Salmeron Financial in Dallas.
Basically, a person can have nearly any type of regular investment in an IRA, whether a CD or stock or mutual fund, and the IRA label indicates how it is treated with regard to tax reporting.