You have set a goal of saving $4,000 every year, beginning the year you finish school and start working and lasting until you retire. You are considering these three investment instruments: an IRA, stocks, and certificates of deposit. Which will likely produce the best long-term returns? Explain your answer.

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Marlene Ray

27 January, 16:21

You have set a goal of saving $4,000 every year, beginning the year you finish school and start working and lasting until you retire. You are considering these three investment instruments: an IRA, stocks, and certificates of deposit. Which will likely produce the best long-term returns? Explain your answer.

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Michaela Cobb · Answer 1

IRA (Individual retirement account)

Explanation:

An IRA is a type of account set up purposely to encourage savings towards retirement, and as a result some benefits are inculcated into it.

One key advantage of IRA over the other options of savings is that it has a higher rate compared to the certificate of deposit, meanwhile the effect of the macro economic factors on the stocks could lead to its instability. This interest can even be be compounded over the savings period, yielding a cumulatively higher interest.

Another benefit of IRA is that the interest earned until retirement are exempted from taxes.