What is An IRA?
An Individual Retirement Account (IRA) is an account that allows you to save for retirement through tax deferred (traditional) or tax-free (Roth) growth.
Traditional IRA vs. Roth IRA
A traditional IRA allows you to contribute pre-tax income directly into your retirement account. This is called tax-deferred because instead of paying taxes currently, you’ll pay (income) taxes when you withdraw money out of the account.
A Roth IRA allows you to contribute income that has already been taxed. This means that as you grow your money in your Roth IRA, you will not have to pay additional taxes when you take money out of the account.
Mega Backdoor IRA
Another way to be sure you’re making the most of your retirement funds, is to set up a 401(k) and contribute the maximum amount each year. Learn more about a Mega Backdoor IRA with our guide.
An inherited IRA works a little differently than other IRA types. Contributions cannot be made to these types of IRAs, and they have their own rules about when money can be taken out of these accounts.