retirement

How do I: Open an IRA?

Topic: retired, starting out, baby boomers
Who is affected: CONSUMERS AT EVERY STAGE OF LIFE
DEGREE OF DIFFICULTY: Moderate
What you'll need: Adjusted gross income of less than $116,000 (or $169,000 for couples filing jointly); money to save.

What you need to know

An individual retirement account is a place to put money away so that it can grow tax-free over a period of years. It's the compounding interest that enables you to retire comfortably in the end. The more time you allow for compounding, the bigger the sum grows.

As of 2008, IRAs allow you contribute up to $5,000 per year ($6,000 if you're over 50). When choosing an IRA, you must decide between a traditional IRA and a Roth IRA. Each type offers its own advantages and disadvantages.

To be eligible to make tax-deductible contributions to an IRA, you cannot make more than $114,000 a year ($166,000 for married couples filing jointly).

You can start an IRA at many banks and brokerages -- in person or online. If you need help, consider hiring a Certified Financial Planner.

Step-by-step
Do you know what it takes to work towards a secure retirement? Use this calculator to help you create your retirement plan.
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