Raise your hand if you spend entirely too much time at work thinking of the days when you won’t have to work.

If you’re anything like me, you’d like that day to be sooner rather than later.

Enter: the individual retirement account.  

Individual retirement accounts — street name IRAs — are a relatively safe way to springboard into a comfortable retirement a little down the road.

There are two main IRA options available: Roth IRAs and Traditional IRAs. Today, we tackle Roth.

Roth IRA Basics:

Roth IRAs are a FANTASTIC investment option for young-ish people, although you don’t have to be young-ish to have one. Why are they so great? Because if used properly, it can can provide a stream of tax-free retirement money.

Basically, you put after-tax dollars into a Roth IRA — that’s money that comes out of your paycheck after taxes are collected (or, likely, straight out of your checking account). If you don’t withdraw from your Roth IRA, the government won’t tax you on the earnings, AKA the money the account makes just sitting there.

(Side rant: You may be thinking, but does the IRS ever tax on the money an account earns just sitting there? YEP. That’s right! When you earn interest, say, in a savings account or a money market account, that earned money gets taxed. The first time I fully understood this, my mind was blown.* The gov’ment do take a bite.)

The most market-savvy, smart thing to do with your Roth IRA? Nothing.

Leave it alone. Ideally, you won’t withdraw anything until age 59½. Of course, that’s not always how life works. When you’re in your twenties, it’s hard to commit to investing money that you may not see again for 45 years. Heck, I can’t decide on whether I want to spring for the organic apples — you want me to take a stab at investing the only money I’ve ever had?! There is way too much uncertainty at this stage of life, but that’s what makes a Roth IRA so attractive.

One of the best features of a Roth IRA is that you can withdraw contributions tax-free as long as you’ve been contributing for five years. That means you can get the money you actually put in there without a 10% penalty, but you forfeit the earnings. You can’t treat this like a checking account, but if you decide that you need that $8,000 you diligently contributed so that you can buy your first home, you can. You’re not locked in.

All that said, want to know the absolute best part about a Roth IRA?

If you let the account grow until retirement, you can withdraw your money — INCLUDING EARNINGS — completely tax free.

And you KNOW how I feel about tax-free money.

Roth IRAs, summarized:

• The standard deposit requirement is usually $1,000 minimum.

• You can only contribute up to $5,500 per tax year. Unless you are over 50, then you can contribute $6,500 — you get an extra G to “catch up.”

• Roth contributions (but not earnings) can be withdrawn penalty- and tax-free at any time, even before age 59½.

• There is a salary restriction. So if you make over $118,000 (or $186,000 if you’re filing jointly) first of all, congrats on attaining what those in the financial world officially call “baller status.” Secondly, you have surpassed the Roth IRA and can’t contribute to one anymore. You can’t sit with us.  

• If possible, max that bad boy out every year. You’ll probably (hopefully) earn more money and land in a higher tax bracket as you get older, so why not pay fewer taxes on the money you invest now rather than paying more taxes on money you take out later.

There are plenty more restrictions and rules, and you can read more details about Roth IRA eligibility here.

Want to open your own Roth IRA account?

It’s so easy. I have an account through Vanguard, and I’ve had an excellent experience. Their trusted reputation and customer service make me feel safe and secure, like a warm blanket. This isn’t a sponsored post, but maybe it should be?** Big fan.

Stay tuned for my next post, which will include the deets of Traditional IRAs, some account compare/contrast notes and presumably one too many Taylor Swift references.

Do you have a Roth IRA? I’m curious what your retirement plans are! Let me know in the comments below.

*Actually, I said ALLLLLRRRIIIGHHTTYYYY THEN, melted to the floor like the Wicked Witch of the West, said a bad word and allowed a single tear to fall down my face as I convulsed silently. But I didn’t want you to think I was dramatic.

**In the off chance that you're reading this @Vanguard marketing team, hit me up.