IRS Regulations

• The IRA is an account structure with two variations: the Roth IRA or the traditional IRA. The Roth IRA allows tax-free growth where the traditional is completely tax-deferred. Both accounts must be held until age 59 1/2 for the distributions to qualify for the respective tax benefit. In either of these account structures, investors can choose the type of investment and the level of risk. The IRS allows bank accounts, securities, real estate, precious metals and private stock investments.
  
  

Custodian

• Each IRA has a custodian named on the account who is responsible for the bookkeeping and proper IRS record keeping for the IRA. With an IRA certificate account, the bank is the custodian of the IRA. In an IRA shares account, a brokerage firm or mutual fund company serves as the custodian of the account. This makes it easy to identify the type of account.
  
  

Risk Factors

• Bank IRAs, also referred to as IRA certificates, that invest in bank CDs are considered a low-risk investment. Most banks are members of the Federal Depository Insurance Company with assets insured up to $250,000 in aggregate IRA accounts per beneficiary. This offers peace of mind to investors worried about market conditions. Brokerage firm IRAs invest in securities such as stocks, bonds and mutual funds. When you buy a stock or mutual fund, you purchase shares, making it an IRA shares account. These investments fluctuate, sometimes dramatically.
  
  

Considerations

• While banks sell time certificates, brokerage firms have started to market time certificates on the secondary market. This means that a person in Alaska can purchase a time certificate from a New York bank through a brokerage firm. The investor may be pleased with a higher return than what he might get locally, but he needs to understand that the custodian is not the bank and therefore the account is not FDIC-insured.
  
  

Balance

• There is no IRS regulation that states how many IRA accounts an investor can have. This means that the investor can open and maintain both a bank IRA and a brokerage IRA. While he may pay custodian fees for both, he may appreciate the balance of diversification. He can have some assets FDIC-insured while seeking more aggressive growth in shares of stocks and mutual funds.