But with an IRA, the interest that accumulates is tax-deferred. Let's say Tim bought a number of bonds that in the aggregate yielded 8 percent a year in interest. His money would double every 7 years in the Roth. So long as he kept it in for 5 years, the growth would be all tax-free, not just deferred. That's tax-free, and without Timothy adding a penny in savings over the next 20 years.
Individual bonds can be a good friend to conservative investors.
If Tim is willing to take a little less in rate, he can buy an insured bond, and even if the corporation tanks he will never lose principle. Meanwhile, his investment will mature at a specific, predictable rate, and he'll be paid on a specific, predictable date. Yet, if he ever overcomes his stock-market phobia, he can always sell his bonds with one phone call and get into the market. Adriane G. Berg is a financial adviser. Y A self-described ultraconservative investor is reluctant to abandon safety but is uncomfortable with meager returns in the midst of a bull market.