The IRA: The One You Set Up Yourself
Okay. We just spent a whole module on the 401k, the one that shows up through work, gets money taken out before you even see it, and sometimes comes with a match.
The IRA is different in one specific way: nobody sets it up for you. There's no HR person handing you a form on your first day. No payroll system quietly pulling money out. You have to go do it yourself, on purpose, which is exactly why so many people never get around to it.
Here's the thing. I think that's the only reason IRAs get skipped this often. It's not that they're worse. For a lot of people in their 20s and 30s, a Roth IRA is honestly the easiest first move available to them. It just doesn't come with a built-in nudge. You are the nudge.
What an IRA actually is
IRA stands for Individual Retirement Account. Individual is the key word. It's not tied to an employer at all. You open it yourself, usually at a brokerage, and you put money into it yourself.
There are two main flavors for our purposes:
- Traditional IRA — you may get a tax deduction now, and you pay taxes when you take the money out in retirement.
- Roth IRA — you get no deduction now, you pay taxes on the money before it goes in, and then it grows and comes out completely tax-free later.
I'm a bookkeeper, not an advisor, and there's a lot of nuance in which one is "better" for your specific tax situation that I'm not going to pretend to sort out for you. That's genuinely a conversation for a CPA if your income or your tax picture is complicated.
But for most beginners, especially younger ones, I lean Roth. You're probably in a lower tax bracket now than you will be later, so paying the tax today, while it's cheap, tends to work out well. That's my opinion, said as an opinion, not a rule.
Why it gets skipped
Nobody skips the 401k on purpose once they understand the match. But the IRA has no automatic paycheck deduction, no HR meeting, no envelope that shows up. You have to sit down, pick a company, fill out a form, and connect a bank account. It takes maybe twenty minutes once you know what you're doing, and that twenty minutes stops more people than any actual complexity in the account itself.
How to actually do it, this week
- Pick a brokerage. Any of the big well-known ones will do. I'm not going to name favorites here because that's not my lane, but you want one that lets you open a Roth or Traditional IRA with no account minimum and low-cost index funds.
- Open the account online. You'll need your social security number, your bank account and routing number, and probably ten minutes of patience for the identity verification step.
- Fund it. This is the part people psych themselves out of. You do not need a big number. You can start with $50.
- Pick something simple to invest in. A target-date fund or a broad index fund is plenty for someone just starting. You don't need to pick individual stocks, and honestly, I wouldn't know how to help you if you wanted to. Nobody on the internet reliably does either, no matter how confident they sound.
- Set up automatic transfers if you can, even small ones, so it isn't something you have to remember and decide on every month.
The 2026 contribution limit for IRAs is $7,000 if you're under 50. You do not need to hit that limit to make this worth doing. Small amounts count. You don't have to fix it all at once.
The $50 story, because it matters here
I opened my own Roth IRA with fifty dollars. That was what was left over after the month, and I remember feeling a little silly about it, like it was too small a number to bother the account with.
Fifteen years later, that account is the one I point to when someone tells me small amounts don't matter. It's not the biggest account I have. But it's the one that proves the point, because it started at almost nothing and it's still there, still growing, still mine.
I keep a folder of short essays I've written over the years, mostly just for myself. One of them is about money, and it has a line in it that I still think is true: the account doesn't care how small the first deposit was. It only cares that you made it.
One caution
Once the money's in an IRA, know the rules before you touch it. Pulling money out early, before 59½, usually comes with a penalty on top of the taxes, with a few narrow exceptions. This isn't a savings account you dip into for a car repair. Treat it like it's already gone, in the good way.
Before next time
Pick a brokerage this week, even if you don't fund the account yet. Just get as far as having a login. That's the twenty minutes that stops most people, so let's get it out of the way. 💛