Many people invest their proceeds in mutual fund and stock accounts. However, with the recent volatility in the stock market, you may be wondering if there is a way to insure your IRA to avoid losing the money you have worked your whole life to accumulate. Below are three options to consider to protect the principal of your Individual Retirement Accounts.
- Money Market Accounts. Money Market Accounts are accounts that invest in money funds. These funds are generally valued at one dollar a share and earn interest over rolling periods of time. Interest varies depending upon the company you use, but the principal of your IRA account is usually insured. To open a money market account you should go to your nearest bank or credit union, or you can open one directly with mutual fund companies. The most important thing to consider if your goal is prevent your IRA from losing money is whether the money market is FDIC insured. The United States government provides insurance of up to $250,000 for IRA accounts.
- Certificates of Deposit (CDs). Certificates of Deposit are another option to consider to insure your IRA. CDs can be bought at almost any bank. These investments pay a fixed interest amount over a set amount of time - 3 months, 6 months, 9 months, 1 year, etc. IRA CDs are FDIC insured up to $250,000. You should shop around to get the best rates and to ensure you are not penalized if you should have to cash the CD in early.
- Annuities. Annuities are an insurance product. You can purchase an annuity by contacting an insurance company. There are two basic kinds of annuities: Variable and Fixed. Fixed annuities guarantee you a fixed return every year. This return may underperform the stock market, but you typically will not lose principal. Variable annuities have an number of investment options and you do have some risk of loss of principal. However, many annuity companies today have guarantees that can provide you with income over your lifetime and can offer you a return of principal option, which simply means that you will get back what you put in. Annuities can be risky. Before you purchase an annuity, make sure the insurance company is reputable and comparison shop for benefits.