Hey there! This past year I got hyper into learning about investing for my future. I even made some small investments! It’s been one small step for man, and one giant expense for that same poor man.
I want to share a bit on how I stumbled into this.
I started saving some of my paychecks from graduate school when my parents began to encourage me to save for my retirement. They told me to look into something called a Roth IRA and also a 401k. Here’s the skinny (according to me) these two:
- Roth IRA – A type of retirement savings account that you can open with your bank, your workplace, an e-trade account (that’s what I did), etc. Any money you put into this account can’t be taken out until you’re 60 or so. Technically you can take your money out earlier in an absolute emergency but there is some kind of associated penalty
- The benefit is that when you reach the age to take money out of this account you won’t be taxed on this money.
- The tradeoff is that you still have to pay income taxes on the money you put into your Roth IRA the year you earned that money.
- The idea is that Roth IRAs are great for young people. You can put money in while you are young, poor, and still in the lowest income tax bracket, and later when you’re 60, all that savings has accrued interest and you can have it all back without needing to pay taxes on it. This is excellent if you, like most people, find yourself in a successful, high income tax bracket in your later ages.
- For the record, there is also a slightly different variant of this known as an IRA (Basically, no tax when you put money in. Pay taxes when you take the money out)
- 401k – To me this is the holy grail of retirement savings accounts. It’s only offered by your workplace and not all jobs offer (I think some companies use it as an incentive to attract talented employees). You pay money into this account and your company agrees to match a small percentage of your contributions. It’s essentially free money that your company gives you! Sadly, my job doesn’t offer me any such option, but if your job does, then I highly recommend maxing this out as soon as you can.
Anyway, I took a leap and I opened an account with e-trade for a Roth IRA. (Shoutout e-trade. Sponsor me please! haha)