As a very financially illiterate person, I’m just now entering the adult world and trying to start being smart with my money. Any tips/advice on how to navigate opening an IRA would be lovely!
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A Roth IRA is a type of IRA.
So first, an IRA is an Individual Retirement Arrangement ([not account](https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras)). It’s a way to save money for retirement. It’s called an Individual arrangement because you set it up; it’s not done through your employer.
When you contribute to an IRA, unless you make over a certain amount, you can deduct the amount you contribute from your taxes. When you take the money out at retirement, you pay taxes on the money you take out.
Now back to Roths. Roth IRAs are the same as traditional IRAs, except you don’t get a tax deduction on the money you contribute. You pay taxes now, but you aren’t taxed when you take the money out at retirement.
Another important difference is required minimum distributions (RMDs). With a traditional IRA, you must start withdrawing money from it when you reach a certain age. The reason is there’s a huge lump sum on which you owe taxes, and the IRS would like those taxes. Roth IRAs have no RMDs while you’re alive. Your heirs may need to take RMDs, but you do not.
You can open an IRA at any of the major brokerage firms (Fidelity, Vanguard, T. Rowe Price, etc). Don’t open IRAs at your bank.
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