Individual Stocks

• A Roth IRA can be an suitable vehicle for buying and selling individual stocks, because the favorable tax treatment eliminates a lot of the barriers to participating in the stock market. When you buy and sell in a taxable account, you must pay capital gains taxes on every profit you make. But when you trade stocks in a Roth IRA, there are no capital gains taxes. This allows you to keep all the stock market profits you generate, and that can boost your tax-free post-retirement income.
  
  

High-Turnover Mutual Funds

• When you choose a mutual fund for a personal account, one thing you should consider is the turnover ratio. The higher the turnover ratio, the more capital gains the fund is likely to generate, and that could increase your tax burden significantly. With a Roth IRA, however, you do not have to pay any capital gains taxes, and that can make the Roth the appropriate vehicle for those high-performing high-turnover mutual funds. You still need to consider the costs and the performance of the fund, but if you can find a fund with a consistent record of performance and reasonable costs, putting it in your Roth IRA makes sense.
  
  

Target Date Funds

• If you prefer to take a passive approach to planning your retirement, a target date fund can be a suitable choice. With a target date fund, you pick the date closest to the date you plan to retire. The money manager allocates the portfolio among stocks, bonds and fixed-income investments, based on the number of years you plan to hold the money before you retire. It is important to look at the expenses and fees of these funds as well as their historical performance in both up and down markets.
  
  

Years to Retirement

• The tax-free status of a Roth IRA makes it a suitable vehicle for aggressive growth investments, such as individual stocks and actively managed mutual funds. But as you get closer to retirement, it is important to review your asset allocation to ensure it still meets your needs. As you near retirement, you may want to pull some of your money from stocks and stock mutual funds and put it in safer investments, such as government bonds and money market accounts. Rebalancing your Roth IRA portfolio is easier than working with a personal account, because there are no tax considerations to cloud your decision.