Money Fitness

There are many different types of retirement accounts, and so it is a good idea to familiarize yourself with them, and choose the account, or accounts, that best matches your lifestyle and needs. Furthermore the best type of retirement account for you might change as you grow older or change careers, and so you can contribute savings to a handful of different types of retirement accounts depending upon your changing needs. 

The two general types of retirement accounts you should be aware of are workplace based retirement accounts and individual retirement accounts, or IRAs. 

What is an IRA?

An IRA is an Individual Retirement Account, that allows you to save for retirement. The main benefits of IRAs over workplace retirement plans is that you do not have to be a full time employee to take advantage of them, and they come with various tax benefits. 

There are two types of IRAs:

• Roth IRA
• Traditional IRAs

Roth IRAs are a great option if you:

• Currently pay taxes at a low rate (in other words, you don't have a lot of income)
• Want more flexibility for when you can withdraw money from your account
• Don't want to pay taxes on your investment income in retirement 

Traditional IRAs are a good option if you:

• Make too much money to qualify for a Roth IRA
• Want to be able to deduct your IRA contributions from your taxes (the downside to this is that you will have to pay taxes on that money when you withdraw it in retirement instead). 

Both types of IRAs have restrictions on the amount of money you can contribute annually, and penalize early withdraws, however, if you start investing early, and allow time and compounding interest to work on your savings, these can be an incredibly lucrative (and easy) way to help fund your retirement. 

To learn more about Roth IRAs and their incredible benefits check out these articles: 

8 Things Millennials Need to Know About Roth IRAs: Young people can take advantage of decades of tax-free investment growth.

What is an IRA?

Workplace retirement accounts are retirement accounts set up through your employer. These accounts can be great deals if you are currently employed, as they often include benefits or "matched contributions" from your employer and can come with tax benefits. The best way to learn about the workplace retirement accounts available to you and how to use them is to talk to the HR staff with your employer. 

These types of accounts can include: 

401(k) -  A retirement account available at many workplaces

Solo 401  (k) - A 401(k) for an individual business owner without any employees. 

403 (b) - An account similar to a 401(k) that is offered by nonprofit employers. 

458 (b) -  A retirement plan offered to employees of state and local governments. 

More information about these accounts can be found here.