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can anyone explain an IRA in layman's terms?

I'm thinking about buy whole life insurance, but have heard from a few people that an IRA is anothe option that may prove to be more successful as far as "saving". 1.What are typical interest rates of an IRA 2. can I borrow against it as I can with a whole life insurance policy (and taxfree if so)? 3. What tax credits do I receive and/or tax penalties, if any? I don't know the difference between Roth and Rollover or Traditional, and I don't really have a clue about 401k...why don't they teach us this stuff in HS or at elast in COLLEGE??<--that was ant, not question, sorry...

Public Comments

1. Go with the IRA first as it offers tax savings. Whole Life Insurance can have high fees. IRA is an Individual retirement account, and can be held in variable savings methods so the interest earned varies. Taking money out will incur penalty fees. Let's say you open two accounts at a Mutual Fund, one is a regular account and one is an IRA. The difference is the tax savings and the penalty fees for withdrawals for the IRA. That's all.
2. 1. If you get it at a bank, you have various choice, mainly CD's. Interest rates are currently around 5% but change. You can also invest it in mutual funds (or various other securities), which may go up or down in value. 2. No. 3. If it is a traditional IRA, you may be able to deduct your contributions. If it is a Roth IRA, you will eventually be able to take out money without paying tax on it. In either case, if you tax money out before age 59 1/2, there may be a penalty. In either case, if your income is low enough, there is a tax credit of up to 50% of your total retirement plan (IRA, 401K, etc.) contributions.
3. There is a great book that teaches the basics of investing: "Investing For Dummies." Its a fun read and worthwhile.
4. Write to your Congressman and tell him you want to change education across the United States of America and teach everybody about IRAs. Back in the 60s the United States of America started teaching students about sex to reduce the number of teen pregnancies. 40 Years later, the United States of America still has the highest teen pregnancy rate in the First World. 42 in 1000 get pregnant. (15-19) Education was not the solution for this problem and if they don't care about dying (Of AIDS) do you really think they are going to pay atention in the class that talks about what they are going to do at 50? Nevada has the highest teen rate in the United States of America. I wonder why?