Saving money isn’t easy, especially if you’re saving for retirement. Sure, building up a chunk of change to pay for a vacation or even a wedding is hard, but it’s less costly, more manageable, and a whole lot simpler than, say, quitting your job and never working again.
Luckily, there’s a way to save money, have that money make money, and maybe even pay less in taxes.
Yes, you read that correctly. With something called a Traditional IRA, you can set aside a portion of your earnings every year, deduct them from taxes, and watch your savings grow until you need them for retirement.
Like all money-related matters, putting your money into a Traditional IRA is a bit more complicated than simply taking money from your bank and putting it in a drawer for later. That’s why Wall Street Survivor made this friendly cartoon to explain everything you need to know about Traditional IRAs and how they can help you.
Traditional IRA accounts with investments in stocks and bonds will likely grow more than IRAs invested in bank products like CDs and money market accounts. This is because the stocks and bonds often yield higher rewards. At the same time, investing in stocks comes with a higher risk, whereas CDs and money market accounts offer lower but guaranteed returns on your investment at almost no risk.
There’s also a Roth IRA, which is similar to a Traditional IRA, but doesn’t let you deduct your contributions from taxes. With a Roth IRA, your contributions are still part of your taxed income each year. When you take money out of the Roth IRA during retirement, you won’t pay a single cent in taxes. This is especially good when you’re on a fixed income and not working during retirement.
Whether you choose a Traditional IRA, a Roth IRA, or contributing to your company’s 401k, you should choose something. After all, you do want to retire, don’t you?
Share this video with your friends below, and maybe get started on the whole retirement thing sooner rather than later.