My first experience with a brokerage account was just and individual account. When I started my own business then I started to wonder how do I buy stock through my retirement account? I didn’t realize at the time that all I had to do was open a separate brokerage account. Only this type of account was IRA or individual retirement account. Once I opened my account, all I had to do was fund it with my first contributions and then wait for the funds to be available.
After that it was easy to buy stock inside the IRA. It worked just like my individual account. The only difference is not really seen at the brokerage firm you open the account with, it’s in the tax treatment of the investment. Stocks bought inside your IRA that have realized gains (that you have sold at a profit), taxes on those gains are deferred until the funds are withdrawn. Same goes for any dividends received. Using an individual retirement account to buy stocks is actually ideal because most investments in the stock market are long term investments anyway. Since you are earmarking these funds for retirement, the fact that they are tax deferred only help your overall stock market investing returns since they are eroded by taxes.
So, remember that the mechanics of buying stocks in IRA’s are the same as buying them in other account. The difference is the tax treatment of them by the IRS.
Also remember that any money that you put into an IRA can’t be taken out without a 10% penalty unless you have reached the age of 59 1/2.
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