Can someone please explain what a cd and an ira are and what are the positives of having one & vice versa.?

Individual Retirement Account (IRA) is a tax-deferred account for employed persons and spouses whose earnings are not taxed until withdrawn, hence tax deferred.

Excerpt (para. 4, NY Life)
â€œRoth IRA is a variation that lets you withdraw principal and earnings completely tax-free after age 59 1/2, as long as contributions have been paid at least five years. Unlike traditional IRAs, Roth IRAs don't require you to take distributions at age 70 1/2, and you can keep contributing to them as long as you like as long as you have earned income.â€

Further details of IRA referenced below (Bear Stearns).

Certificates of Deposits (CD) are bank issued I-owe-you notes in which the depositor agrees to lend money to the bank over a specific duration in return for a regular interest paid to the depositor. Some, not all, CDs can be transferred, i.e. sold to another person. Rates can be fixed, such as 5% throughout the duration of the CD until expiration (usually 5 years), in which the bank returns the money to the depositor.

CD Pros
- Fixed interest rate returns from money lent to banks, principal and interest paid back usually after 5 years.
- Useful if prevailing interest rates are lower than savings and current accounts.
- Useful if prevailing interest rates fluctuate wildly, however, limiting potential gains/losses.
- Usually 'safe' in that large financial institutions seldom collapse overnight, therefore able to repay the depositor
- Cash tied up is of a maximum duration of 5 years, after which, suitable and better alternatives may arrise to get more returns from the principal amount deposited.

IRA
- Depends, get a financial advisor.

Positives In General
- Tax up to a ceiling is not paid now
- Tax withdrawn at statutory age is taxed usually at a lower rate, dependent on federal policy, since the purpose is for retirement.
- Regulations on withdrawal subjects money to be locked away for a long time. Useful tool to reduce temptation to early withdrawal which results in little monetary gains.

Negatives in General
- Taxed to the full extent plus penalty for early withdrawal.
- Regulations on withdrawal subjects money to be locked away for a long time.
- Cashflow is restricted that money is tied to the IRA and follows governing regulations thereof.
- Cash otherwise available for more lucrative investments or better rates of return (money coming in) is not an option, without consideration of governing regulations thereof.

CD's are certificates that a bank issues to you. They borrow money from you, they invest it, and give you usually around 4-5% a year. IRA's are retirememt accounts that are invested into the market. Mutual funds are tied into IRA's and usually give you a large amount of opportunity over a CD. Both are great to invest in, but how much of each is a personal decision. Just remember more risk equals more reward.

A deposit made to a IRA is tax deductible. For 2006 $4000 is the limit you can put in a IRA. You are able to count the IRA contributions off your taxes when you file.

AN IRA is an individual retirement account. When you invest, you CAN'T touch the money until you retire. A CD is a fixed-rate short-term (usually 6 months to 5 years) instrument which is NOT tied to retirement. Simply shop for the the highest interest rates you can find.

A CD is a certificate of deposit. An IRA is an individual retirment account. Please seek help from a real financial representitive, and do not, do not, DO NOT FOLLOW THE ADVICE OF PEOPLE HERE.

They are completely independent of one another. A CD is a Certificate of Deposit - a time deposit. You put in $X now and at the end of the agreed upon time, you get $Y ($X plus interest).

An IRA is a tax deferred account, where you agree to act in accordance with rules Congress first enacted in 1974 regarding behavior, in return for which, the taxes on your money are delayed until you take it out. The rules are complex, and there are three types of IRA (Roth, Traditional, and the rare Nondeducible), each of which can be invested in any or several of a given number of investment vehicles, of which the CD is one.

I also suggest echo the first answerers caution about trusting the investment advice of people you don't know. Get a financial advisor you can trust.

I echo Ellis D's answer. A certificate of deposit is a very secure instrument typically offered by a bank or other depository institution. They offer a fixed rate of return for a specific period of time with a minimum investment. For example you can deposit $1000 for six months with a return of 5.25%. They offer a fixed rate of return and there is very little risk to your principle.
An IRA is an individual retirement account. It is a provision of the tax code that allows for certain types of investments to be made for specified purposes; i.e. retirement. An IRA is a type of account, not a type of investment. An IRA is useful for certain kinds of investing but it also has restrictions regarding when and for what reason your money can be withdrawn.

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