Roth IRA
A Roth IRA is a retirement account that can be amazing for young earners. You contribute money you already paid taxes on, then the growth can be tax free later.
What Is a Roth IRA?
A Roth IRA is a type of individual retirement account. You open it yourself, invest inside it, and let it grow for the long term.
The simple version:
You pay taxes now, then future you gets tax free growth if you follow the rules.
Why Roth IRAs Are Great for Young People
If you start young, your money has decades to compound. Even small contributions can become big over time.
A Roth is built for retirement, but it has some rules that can make it more flexible than other retirement accounts in certain situations.
What You Can Invest In
A Roth IRA is an account, not an investment. Inside it, you can buy diversified investments like index funds.
Index funds: simple and diversified, often the best starting point
Target date funds: hands off investing that adjusts risk over time
Bond funds: usually lower risk than stock funds, but lower return
What to Watch Out For
You need earned income to contribute
A Roth IRA is funded with money you earn from working. Gifts do not count as earned income. Retirement accounts have rules, and it is important to follow them.
Teen friendly rule:
If you have a part time job, learn what earned income means. A Roth IRA can become an incredible tool later.
Key Takeaway
A Roth IRA can be one of the best accounts for young earners because it gives your money decades to grow. The key is simple: invest for the long term, keep costs low, and let compounding do the heavy lifting.