Best of both worlds
Can’t choose? You can actually contribute to both types of IRAs if you want to take advantage of the unique benefits each account offers. The annual contribution limit can be split between your IRAs. And if you currently have a traditional IRA and decide a Roth IRA would be a better fit, you can always convert your traditional IRA account into a Roth.
Is an IRA a mutual fund?
The short answer is that “no,” an IRA is not a mutual fund. The biggest difference between an IRA and a mutual fund is that an IRA is a type of account that can be funded with an investment like a mutual fund, an annuity, or any number of other investment vehicles.
It usually depends on the institution that you’re opening the IRA with as to what type of investment it can be funded with. For example, a mutual fund company will usually offer mutual funds to invest your IRA in, an insurance company will offer annuities, a bank will offer CDs, and a brokerage firm may offer stocks and bonds.
As with any investment decision, deciding which type of vehicle to use to fund your IRA will depend on your objectives, your risk tolerance, and your investing timeline. Just keep in mind: The sooner you start your IRA, the longer your assets can grow to help you meet your retirement goals.