Today’s CNNMoney “Ask the Expert” column clears up a common confusion regarding the nature of Individual Retirement Accounts. A woman writes:

I opened a Roth IRA at my credit union, but now I’m confused. As I understand it, my Roth, which the teller told me is “just like a CD,” lasts only 23 months. Based on what I’ve read about Roth IRAs, however, I thought you could put your money aside for a couple of decades. Does the amount of time the Roth lasts depend on the financial institution you open it with, or do all Roth IRAs expect you to decide periodically whether you want to extend it?

As the Expert, Walter Updegrave, notes, people often confuse an IRA account with the investments that go into that account.

A Roth IRA is nothing more than a type of account that’s designed to help people save and invest for retirement. When you invest through a Roth account, you gain certain tax advantages. For the 2006 tax year, you can contribute up to $4,000 in a Roth (plus another $1,000 if you’re 50 or older), assuming you meet the qualifying criteria.

Unlike with a traditional IRA, you don’t get a tax deduction for the amount you contribute to a Roth. But when you eventually pull money out of the Roth, you won’t owe any taxes on it (again, assuming you meet certain criteria.)

Now, within that Roth account, you can hold a variety of different types of investments. In fact, you can think of the Roth as a bucket for holding retirement investments. You can fill that bucket with stocks or bonds or mutual funds or CDs, real estate (although I don’t generally recommend it), or any combination of those.

Updegrave explains more in his column.

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