A Beginner’sGuide to Money Management （下）

Open an Individual Retirement Account

Don’t have an employer who offers a 401(k)?You still want to save for retirement, and an Individual Retirement Account canhelp you save. Even if you do have a 401(k), an IRA is a great way to sock awayextra money or just invest with more flexibility and control.

What if you’re in debt, though? Should you still save for retirement? Not all experts agree on what’s more of a priority,debt or retirement, but you can read more about that here, then decide if you’re ready.

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Like a 401(k), an IRA is an account in which you save money for your future retirement. There are two basic types of IRAs: traditional and Roth. Both of them offer a different kind of taxadvantage.

Traditional IRAs Offer Tax-Deferred Growth

With a traditional IRA, the earnings from your savings into the account are tax-deferred. This means you pay taxes on your savings and earnings when you withdraw the money (probably when you retire),but your contributions (savings) are pre-tax. Come tax time, if you’reeligible, you can deduct the amount you save in a traditional IRA from your income. In other words, you pay less in taxes now.

Roth IRAs Offer Tax-Free Growth

With a Roth, you can’t deduct your savings from your income like you can with a traditional. However, when you retire, you won’t pay taxes on any money with you withdraw. Your savings into the account are post-tax; meaning, you’ll pay income tax on the money you put into the account. In other words, you pay taxes now. But that money will grow tax-free, which is awesome. Not everyone is eligible for a Roth, but you can check your eligibility here.

The general rule of thumb is, if you’ll bein a higher tax bracket when you retire, you should pick Roth. If you’re in a higher tax bracket now, you should go with traditional. That’s a really basic answer, though, so read our guide to IRAs to make the best decision for your own situation. There are even more types of IRAs. If you’re self-employed, you might also want to open a SEP-IRA, for instance. But for the most part, a basic traditional or Roth IRA is the way to go.

IRAs also have contribution limits, so keep them in mind when you decide how much you want to save in one. Here are the contribution limits for 2017:

$5,500 ($6,500 if you’re age 50 or older),or your taxable compensation for the year.

Again, you’ll want to revisit your budgetto see what your own savings amounts are. Many experts say you should invest atleast 10 percent of your income for retirement. That number might seem high for a lot of people, and that’s okay—every little bit helps. If you want more detail on how much you should save, though, we’ve written a detailed guide here. The basics come down to:

Determine when you want to retire.

Estimate how many years to include in yourplan (i.e., how long you are likely to live).

Estimate what your expenses will be inretirement.

Make an inventory of your current assetsand savings.

From there, you’ll actually open an IRA ata firm like Vanguard (a popular option with super low fees). You can easily do it online. It will take a while to link your bank accounts to your IRA so youcan start making contributions. In the meantime, do some research and figure out what kind of investments you want to buy. We recommend some really simple mutual funds you can get started with here.

Learning to be good with money takes time,and a lot of it is just about adopting better habits and behaviors. That said,you might as well get started with the practical stuff. In addition to these steps, make a goal to learn a little bit about money every day. You’re more likely to stick to a budget and debt goals if you have financial literacy on your mind every day, even if it’s just fifteen minutes