Ah, retirement – the golden phase of life everyone longs for yet rarely think to plan in advance for. Now that we’ve brought it to your attention, it’s a good time to remind you that it’s never too early to start saving for retirement. But the prospect of kickstarting such an undertaking can be overwhelming, and rightfully so; after all, the basics of retirement can be a bit confusing.

Let’s start simple with IRAs. An IRA, or Individual Retirement Account, is essentially a savings account for your retirement. The two main kinds are Roth IRAs and traditional IRAs.

For Roth IRAs, you contribute money you’ve already paid taxes on, so this type of IRA is tax-free. You can also withdraw money from it tax-fee. However, you must meet income requirements to open a Roth IRA.

Money you contribute to traditional IRAs, on the other hand, you can deduct on tax returns. Furthermore, you don’t have to pay taxes on this money until you start withdrawing it during retirement. A bonus of this is that a lot of new retirees are often in a lower tax bracket than they were when they were actively contributing, so there’s a chance they might pay lower taxes on the withdrawals upon retirement.

Read on to learn more details about the pros and cons of each IRA, and how you can choose the right one for you.

Infographic designed by: Accuplan Benefit Services