Could someone explain to me how and ira account works? My husband and I are 21 and we want to start to put away money for retirement while we're still young. I've heard of 401k and ira accounts but I don't really understand how it all works. My husband has a retirement plan already with his job but we want something else as well. Could someone tell me what would be the smartest and most beneficial way to save our money for the future?

An IRA is an individual retirement account. It is a method of saving for retirement. Your husband is wise to invest in his company retirement. There are many methods of retirement and you are young enough that it is a good time to start now.

What is the best method? That could vary for different people depending on your retirement needs in the future, and your personal views of retirement products. It could also depend on if you would need to use the money put away before retirement or if you just simply wish to save for retirement.

An IRA at a reputable foundation is a good place to start. I would ask a financial adviser if you wish to delve further into the different means to save for retirement. Some banks will help you with retirement planning and your husband's retirement company may have adviser's to help also.

Shirley

I would recommend going to your bank and sitting down with one of their financial advisors to explain the differences. I can give you a brief overview.

A IRA (Individual Retirement Account) is an investment account that allows you to contribute tax deferred monies and earn income tax deferred. The account can hold almost anything as its investment; CDs, stocks, mutual funds, real estate etc. You could have a combination of investments. There are contribution limits and limits on access to the funds. The account can then be drawn from after retirement when your tax bracket should be lower.

There is also a Roth IRA where the contributions are not tax deferred but the income is tax free.

A 401K is an investment account run by your employer (individuals can't set one up). Its similar to an IRA in that contributions are made and income earned on a tax deferred basis. Generally, the company matches some level of contribution so you start with an immediate return on your contribution.

I think you are being smart in thinking about retirement at your young age. By putting aside small amounts now, you will build a larger nest egg over time.