6. Know the Difference Between IRAs.
Life would be too easy financially if investing for retirement meant opening one type of IRA and making a good amount of money at the same time. There are a few options of selecting the IRA you want based on your financial outlook and future. Usually people open and contribute to a traditional or Roth IRA accounts; both of which have certain tax credits and implications. Depending on your future goals, it is wise to know the rules of each account, but generally speaking, a traditional IRA means you do not pay taxes as you contribute and when you retire, you pay taxes based on your lower, retirement income. In contrast, the Roth IRA means you pay taxes yearly, but when you withdrawal from your account when retired, you do not make any tax payments. Both have great advantages and both come with slightly different rules, but discussing tax liabilities with your financial advisor can help you to make the right decision for your future.