14 Personal Finance Facts and Myths: Do You Know the Difference?

THOSE JUST STARTING OUT IN THEIR CAREERS SHOULD INVEST IN A ROTH IRA.

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Most retirement savings programs in the U.S., such as 401(k)s and traditional IRAs, allow tax-free contributions, and the money is taxed when you take it out during retirement. Money contributed to a Roth IRA, however, is taxed now, instead of when the funds are withdrawn. “If you’re just starting out and not making a huge salary, the tax rate you pay now is going to be much lower than the tax rate you pay at retirement,” Mannes says. “It makes more sense to take the tax hit now (by opting for a Roth IRA), when it won’t be huge, than later when you will be in a higher tax bracket.”