No one wants to think about retirement, especially in their twenties and thirties. Yet by putting money away at a young age, you prevent yourself from literally working yourself to death.
That’s why IRAs and 401ks exist. These financial vehicles let anyone contribute a certain amount of money per year, grow that money over time, and take it out when you retire. The traditional variations of these accounts even let you take sweet tax breaks each year just for contributing money to your retirement. That’s almost like being paid to be smart with your money!
While those tax benefits might be nice and all, they do have one drawback: if you take tax breaks now, you’ll end up paying taxes on your savings when you need it the most.
Enter the Roth IRA.
Roth IRAs do everything traditional IRAs do, but don’t give you a break on your taxes. Instead, they let you take money out later in life without paying taxes. While this might sound unappealing, paying taxes on your contributions now could save you from a future financial headache.
The folks at Forbes recently put together this handy video on Roth IRAs and how they can help you (yes, you!). Whether you’re working an office job or several freelance gigs, Roth IRAs could help you retire without the added burden of paying extra taxes. Here’s how:
How do you open a Roth IRA?
Many companies offer traditional and Roth IRAs accounts along with 401k plans. If you think your company has this benefit, contact your HR representative to learn how you could start contributing to a Roth IRA. If your company doesn’t offer a Roth IRA, most finance firms do. Companies like Fidelity and Vanguard offer several options for Roth IRAs, as does financial startup Betterment.
Do your research on several different companies offering this retirement vehicle, and pick the one that’s right for you. When you’re finished setting it up, try to contribute as much as you possibly can before you hit the yearly limit. If you make yearly contributions for the rest of your career, you’ll be on your way to a much easier and financially stable retirement.