Your friend is trying to decide what investment account to put his bonds in. You recommend that she put them into her IRA. Why do you recommend a tax-deferred account over a taxable account? IRAs pay higher interest then taxable accounts which will make up for the taxes that must be paid. Bonds pay coupons that will be taxed at her regular tax rate in taxable accounts but if left in tax-deferred accounts they will be taxed later, and possibly at a lower rate. IRAs don't have restrictions on withdrawals of the money like taxable accounts do. This will give your friend flexibility to use the money whenever she needs it. IRAs are generally set up by employers so your friend won't have to go to the effort of setting up the account and maintaining the account