IRA Money Market Accounts: Good and Safe Retirement Investing

An individual retirement account, or IRA, is a wonderful tool for saving for retirement, but can be stressful if the whole account is in stocks. An IRA money market account can lessen that stress.

IRA Money Market Accounts: Calm Among Chaos

The fear of losing money is universal and acute. Especially when you've been saving for years and years in hopes of enjoying a comfortable retirement, watching your IRA account bounce up and down with the stock market can be unbearable.

If that fearful feeling sounds familiar, you may want to think about money market investing through your IRA itself. Doing so can help you and your money stay calm in crazy times.

Money Market Investing Basics
Money market accounts are much like regular savings accounts, but traditionally pay higher interest and may require a minimum deposit to get started. The money placed in an MMA is backed by FDIC insurance, up to a limit of $250,000 per deposit, per institution.

Money market comparison tools are available online. Right now, the best money market rates are at or near four percent. While that may not be earth-shattering, the low risk factor cannot be underestimated.

Money market investment is all about limiting risk and growing money slowly but steadily.

IRA Money Market Accounts: What's the Difference?
Many people are scared away from starting or contributing to an IRA because they think IRA investment automatically means being associated with the stock market.

This is one myth that needs to be done away with.

You can put your IRA contribution into pretty much whatever investment you want--stocks, bonds, CDs, or you can even leave it in cash. Or you can use an IRA money market account. If you like higher interest rates than regular savings accounts and the ability to move your money quickly, then money market investing through your IRA account may be right for you.

IRAs are also insured by the FDIC, so you're double-covered.

Beware the Tax Man
IRAs are great because no matter what investment product you choose within the account, you can gain substantial income tax benefits just for contributing. For example, if your tax rate is 35% between federal and state, you can save $350 in taxes for every $1,000 you contribute to an IRA.

For tax year 2008, the maximum IRA contribution is $5,000, but you can put in an extra $1,000 "catch-up" if you're over age 50. Certain special rules apply to IRA investing, so check with your tax pro before starting an IRA., but the bottom line is that you can obtain large percentage returns on your money--just by contributing.

However, you need to remember that an IRA is also subject to special tax penalties if you withdraw the money before age 59 1/2.

As ever, the tax man giveth, but you have to be vigilant so that he doesn't taketh away too much tomorrow.

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