BSK

I have no idea about this stuff and super confused.

lax01

mutual funds are a collection of stock/bonds/other financial things
IRA is a retirement account:
<a href="http://en.wikipedia.org/wiki/Individual_Retirement_Account">click</a>

OldManTan

Just like a 401K fund will. If your employer doesn't offer a 401K, then you want to get an IRA so your taxes are deferred until you are 60-something. Since inflation always goes up, deferred taxes cost you less.

A mutual fund is bought with money you have already paid taxes on. Somebody decides what to invest that money into, so you are "diversified" automatically. Mutual funds have a yearly fee that you pay and when you sell, any money you make is taxed as "capital gains".

Check out <a href="www.fool.com">the Motley Fool</a>

Pugs

The truth about money http://tinyurl.com/268yzd

good plain explanations about beginning financials.

A4SilverT

There are two types of IRA, Roth and Traditional. A Roth is never pre-tax. A traditional IRA might be pre-tax IF you meet the income and other requirements (e.g. no retirement plan at work).

<a href="http://www.irs.gov/publications/p590/ch01.html#d0e1018">IRS Publication 590</a>

Mutual funds can be held in Traditional IRAs, so they can be pre-tax. If held in an IRA, gains on the sale of mutual funds (or any investment held in the IRA) are not taxable. Only distributions from the (traditional) IRA that you take are taxable.

TwinTurboTerror

you retire. Thus, deferred income will be taxed at a lower rate theoretically, unless the gov't overhauls the entire tax system before then.

TwinTurboTerror

I always wanted to know: WTF is going on in your sig pic?

lax01

and you'll understand

OldManTan

Good point.

BSK

Thanks for the answers