How2Day: The Best Funds to Put in an IRA From a 401(k) Rollover

Since IRAs are tax shelters, like 401(k) plans, you won't need to worry about tax liability when transferring the funds to your individual retirement account. However, the investment you choose can dramatically affect your future retirement savings, so make sure you understand your options. Some of the best investments are the simplest, and are available at most brokerages.

Bank CDs are certificates of deposit. A CD represents a timed deposit that the bank accepts from you. They keep your deposit for a specified period and return it with interest according to the terms of the contract. Certificates of deposit generally have fixed interest, but the rates may vary. Banks guarantee CDs and insure them with the FDIC.

You can purchase mutual funds within an IRA. These are a collection of stocks, and sometimes a collection of bonds, with a common investment objective. For example, they might all focus on investments in large, stable, companies. While mutual funds carry no guarantee, they represent the potential for long-term investment returns that are higher than bank CDs and other fixed-interest investments.

Annuities are insurance products designed to guarantee you an income during retirement. Deferred annuities defer a guaranteed payment to you until you want that payment to begin. A deferred annuity purchase inside of an IRA allows you to have a long-term savings vehicle that credits interest at a fixed or variable rate. The insurance company's general account, which invests in bonds and bond-like investments, determines the fixed rate. Investment in your choice of mutual funds determines the variable rate.

Purchases of precious metals like gold and silver can go into an IRA. Precious metals may provide a hedge against inflation over time. With ordinary investments, you must earn an interest rate that at least equals the rate of inflation to counteract its effects. With precious metals, the value of the metal is the investment. You are essentially hoping that the real value of the metal remains unchanged, or changes very little, to preserve the value of your wealth rather than grow it.

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