For many, stashing money in a retirement account probably doesn’t feel nearly as exciting as splurging on a new pair of shoes. And if you’ve just started your career, saving for retirement might seem even less appealing. Unsurprisingly, the median retirement savings for Americans falls short of six figures.

But even setting aside a small amount early on can ease the financial pressure down the road. And one account in particular might just make you rethink letting your retirement goals fall by the wayside.

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A Roth IRA is tough to beat when you’re starting off

The Roth IRA is popular in the retirement world. You can contribute after-tax dollars now in exchange for tax-free income later. And if you’re in a much lower tax bracket than you expect to be in later, it’s an even sweeter deal.

Here’s a quick example: Imagine you’re 27 years old, earning $23,000 from your gig work in 2024, and you decide to stash some cash in a Roth IRA. Since you’re in a low tax bracket, you’re locking in those contributions while taxes are low. Plus, you might even score a Saver’s Credit to knock your tax bill down even more.

Now, let’s say you max out your Roth IRA at $7,000, invest it, and earn a 10% average annual return. Fast-forward 30 years, and that $7,000 could jump to over $122,000. If you keep maxing out your contributions every year, the magic of compounding could set you on the path to a million-dollar Roth IRA. And when you’re 59 1/2, Uncle Sam won’t touch a dime when you’re ready to withdraw.

But there’s a catch: Your income has to be under the threshold to make direct contributions, and there’s an annual cap on your contributions. So do your research and see if this is the best account for you. If it’s a go, start as early as possible so you can maximize the benefits of a Roth IRA.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

View the “Social Security secrets” »

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