Why do you need a retirement account? Why is getting and funding an IRA so important? Shouldn’t Social Security be enough to take care of everyone in retirement? Well, it is not so simple. You need to prepare your finances as much as possible for your golden years, through careful saving, prudent investments and planning for your lifestyle. An IRA can be an important part of that.

When you enter into the workforce, whether that is at 18 or 22, college graduate or not, you need to start saving for retirement right away. Why? Because the best driver of a healthy retirement account is compound interest. And you need years and decades to take full advantage of compound interest. The more money you put away, the earlier your put it away, the more likely you will have a nice, fat IRA to call upon in retirement.

An IRA is an individual retirement account. They were dreamed up in response to the lessening of pensions and defined benefits from companies over the latter half of the 20th century. The basic premise is that you can take control of your financial future and retirement savings. You can get a traditional IRA and a Roth IRA, with all sorts of IRA options in between. The basic difference is that with a traditional IRA, you can deduct the contributions that you make from that year’s income taxes, but you will need to pay taxes on the back end, when you withdraw funds for living in retirement. A simple online calculator makes it easy to determine your position.  A Roth IRA works the opposite. You fund the account with after-tax dollars, you cannot deduct from your annual tax return, but you get to withdraw funds tax-free in your golden years.

A traditional IRA is much more beneficial for those that expect to be in a lower tax bracket when they are retired. The benefits of the traditional IRA are that you can save on your taxes now and then still have a nice nest egg later on in life.

The key is that you need to find the discipline and common sense to be able to save a portion of your income and put it into a traditional IRA. The modern world is full of expensive conveniences. The best way to add some money back into your pocket is to pass on those conveniences and do things for yourself. Learn how to cook and you will be skinnier, but your wallet will be fatter. Learn how to do simple home repairs yourself and you will save tons of dough by avoiding traditional contractors. Even having some simple knowledge is superior to those that just pay people to fix their homes.

Consider getting rid of the car and getting a bike. That is another way to stay healthy and save some cash. No car payment, no car insurance, no gas money. You can walk everywhere. There is no better exercise. As for your commute, you can try to work from home and get rid of all the problems that are associated with the daily trek into the office.

Saving money is not only possible, it is essential to being happy and healthy in your retirement.