5. You should contribute to an IRA
If you’re already meeting the match on your workplace retirement plan (or don’t have one), an Individual Retirement Account is the next step on the road to retirement preparation. The question is: Do you want a Roth IRA or a traditional one?
If you put your money into a traditional IRA, you will receive a tax deduction. It grows tax-deferred, but you pay income tax when you begin withdrawals (which you can do once you hit 59 1/2 and must do at age 70 1/2). When it comes to a Roth IRA, there’s no tax deduction today—but when you tap the account in retirement, it’s tax-free.
“The Roth [IRA] generally makes sense if you think you’re going to be in the same tax bracket or higher in retirement,” says Meyer. As a plus, there’s virtually no required withdrawals with a Roth, which means you can pass the funds to your heirs, and there’s even more flexibility. In most cases, you can get the money without penalty to pay for a child’s college or to pay off your home.
