Remember you can own more than 40 different types of assets in an IRA account. You're not limited to holding just traditional securities. Most major brokerage firms managing IRAs offer a selection of mutual funds for you to invest in but restrict your holdings to traditional securities. They are usually not equipped to handle real estate, private equities or others asset classes that the IRS permits. For instance, you can own most any type of real estate including vacation houses, boat slips, and/or commercial. You cannot, however, own any real estate that you care currently benefiting from. For example, you can own a beach house but you or your family cannot use the property during the time it's held within your IRA. But, you can rent it for a profit. Another example...you can purchase a building lot and flip it 30 days later for a profit...all legal within your IRA. You can even invest in cattle within your IRA. Banks will also lend on IRA purchases. So, it's possible to use leverage. You can expect to pay a slightly higher interest rate than if you were borrowing personally but, in some cases such as real estate, the ability to use leverage in your IRA more than justifies the higher rate. Most people are only aware of the traditional mutual fund type of investments. But, if those are doing poorly...well, you've got other choices. To invest in other types of assets, you need to open whats called a "self-directed IRA" with a custodian that allows you to invest in the full range of asset types allowed by the IRS. With a self-directed IRA, you can invest in real estate and privately held businesses, make secured loans (such as a mortgage), make unsecured loans, and also invest in traditional assets such as stocks and mutual funds. With real estate bought by a self-directed IRA, any income and capital gains grow tax-deferred in the case of traditional IRA or tax-free in the case of a Roth. Fees for a "self directed" IRA with a full-service custodian are higher than those charged by custodians offering only traditional securities. There are only 3 assets classes the IRS forbids you to hold within an IRA: Collectibles, Life Insurance, & S Corporations. As usual with the IRS, there are lots of little quirky rules that failure to follow could result in significant penalties so this type of IRA investing is not recommended for people skittish about actively participating in the decision making process. Anyway, you would not have to sell an office building or a herd of cattle just because you changed custodians. The "system" is geared towards funneling the "masses" into traditional securities. OTOH, that's the safest investment for the vast majority of people. /tricia

Thanks jose and steve for the confirmation and advice! I like the idea of VanGuard or Fidelity and will check out both more thoroughly. I actually have about 25 years to retirement and will be increasing my retirement savings each year. Would love to save 25% but my income is low and I'm already living rather frugally (not a shopper, no vacations, no credit card debt, 3 month emergency fund)! For the last 4 years I have been saving (IRA/Roth) just over 10% of my gross income. My income is low enough that I have qualified for the maximum Saver's Credit (which is why some savings is in an IRA and some in a Roth). In the next year I will be re-entering the regular world of work (after being self-employed for 15 years). And while I have earned a living and loved being self-employed I have decided to do this so that I have better health insurance plan and work for a company that offers a 401K with a company match. My total saved is about $10,000 and the split is actually about $4000 in a regular IRA and $6000 in a Roth IRA. My thoughts are that I should invest the $4000 IRA in something that is relatively stable and I should invest the $6000 Roth in something that offers the opportunity for a greater return (especially since there is no tax on Roth earnings at withdrawl once I retire). At this time I am not looking to convert the regular IRA into a Roth IRA. Knowing the split ... $4000 IRA and $6000 Roth what the best option for each?

You will have to pay taxes on whatever amount you convert to the ROTH. The traditional IRA's permit a tax deduction for the amount contributed in a year, with a ROTH the contribution is after tax money. I guess how much you opt to convert would depend on your tax bracket and your ability to pay the taxes on it and how soon after your retirement you plan to begin withdrawing the funds. . I converted the entirety of my IRA money back when you were first permitted to do so. If I remember correctly, I had between 3 and 4 years to pay the taxes on it. I'm glad I did it then. Now the money grows TAX FREE and there is no minimum age at which I must begin withdrawing the money.

Deemarie - The investment value of a Roth IRA will depend on how you invest it. Depending on the firm that you are with, you should have many choices as to the kinds of funds available. DH and I like our Roths because they are 1) tax free, and 2) we will never have to draw on them if we don't want to, and can leave them to our children. With a regular IRA you must begin withdrawing money at age 70 1/2. No such rule applies to Roths. I like Fidelity for Roths as it has an enormous number of funds, from money markets to many bond funds to a great array of equity funds. One click of the keyboard and you can switch to another fund at any time, with no penalties. Be sure to look for no-load funds.