• A Roth IRA is a type of Individual Retirement Account. Contributions to Roth IRAs are not tax-deductible, but the money in a Roth grows tax-free and withdrawals are generally tax-free in retirement. The Internal Revenue Service imposes a 10 percent penalty on earnings on withdrawals prior to age 59 1/2, unless the withdrawal is for certain limited purposes, such as for education, a down payment on a first home, or in the event of disability or to prevent eviction or foreclosure. Unlike traditional IRAs, Roth IRAs have no required minimum distributions -- you can let funds accumulate in a Roth IRA as long as you like.
  
  

Stocks

• You can invest Roth IRA assets in any publicly traded stock, including both domestic and foreign issues and American Depositary Receipts (ADRs). You can also invest in closely held stock -- in private companies, for example -- but you cannot take income from the business until after age 59 1/2, in most cases, and you must maintain a strict segregation of Roth IRA assets from other assets.
  
  

Bonds

• You can invest IRA proceeds in any bond, including corporate bonds, municipal bonds and Treasury bonds. You cannot take income from these bonds, however, prior to age 59 1/2, without paying a 10 percent penalty on earnings. However, provided the funds have been in the Roth for five years or more, any withdrawals are considered the return of your own money (your basis) and are therefore tax-free.
  
  

Mutual Funds

• You can use your Roth IRA to invest in any publicly traded mutual fund. Some mutual funds, however, have account minimums that are larger than the maximum allowable contribution to a Roth IRA in a given year (though most funds waive the requirement for retirement accounts).
  
  

Real Estate

• You can use your IRA to invest in real estate. Again, however, you must maintain a strict segregation between your IRA assets and non-IRA money, or the IRS may disallow the favorable tax treatment of the IRA. You cannot sell property to your IRA, nor may you invest IRA assets in property for your personal use, either in the present or the future.