A Roth IRA is a retirement account you open yourself. You put in money you've already paid taxes on, it grows for decades, and you withdraw it in retirement completely tax-free. Open one at a reputable brokerage, set up automatic contributions to a low-cost index fund, and let time do the rest.
Why a Roth is great when you're young
You pay the taxes now, while your income (and tax rate) is probably low, and then everything it earns over the decades comes out tax-free. That tax-free growth is the whole magic — decades of compound interest that the government never touches again.
How to open one
- Pick a reputable brokerage with no account fees and low-cost funds.
- Open the Roth IRA online — you'll need your SSN and bank info. It takes minutes.
- Set up an automatic contribution from your checking account, even a small one.
- Actually invest the money — buy a low-cost index fund. (Money sitting in the account uninvested does nothing.)
- Automate and ignore. Increase it a little whenever you get a raise.
There's a yearly contribution limit, and you need earned income to contribute. There are also income limits at higher salaries. The amounts change, so check the current year's rules when you set it up.
New to investing in general? Start with 'Making your money grow' first.
Get your DadgreeCommon questions
Roth IRA vs. 401(k)?
Different accounts — you can use both. Get your employer's 401(k) match first (free money), then a Roth IRA is a great next step.
Can I take the money out early?
You can generally withdraw what you contributed without penalty, but the goal is to leave it alone to grow. It's retirement money, not a backup checking account.