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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Check out resources like r/personalfinance , Nerd Wallet and Investopedia to do more research on this.
An IRA is an Individual Retirement Account. It is *Individual* because you as a private citizen open one for yourself. This is in contrast to another retirement account known as a 401(k) that is provided by private employers. Similar set-up, except the employer can contribute money to the 401(k) account, too – all the money in an IRA comes from your own pay check.
IRAs offer special tax protections on your money.
jrhooo and lethal_rads already did a good job explaining the main differences. A key thing I would add is that the “retirement age” is 59.5 years of age for most people. If you try to make regular withdrawals from the account before then, you will get hit with some hefty penalty fees. There are some circumstances where you can take out a loan against your IRA account, which is something people sometimes do when they are buying a home and need money for a down payment, though this has its disadvantages since you’re basically taking money out of your retirement fund. Maybe some people can afford that, but that’s a personal decision you’d have to make for yourself at that point.
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