While meme stocks make headlines, there’s actually one type of retirement account quietly gaining traction with young investors: IRAs.
'It takes two minutes' to open an IRA
"Access to financial topics and savings has become so much easier for younger generations than it was with prior generations," she said.Financial advisor Winnie Sun, managing director and founding partner of Sun Group Wealth Partners, said this week she helped a 16-year-old set up her first Roth IRA to invest her earnings from her after-school job in a coffee shop.
With Roth IRAs, you invest money you have already paid taxes on, in exchange for tax-free withdrawals in retirement. When it comes time to live on that money in retirement, whether or not you have a tax bill will likely make a big difference to your lifestyle.Fidelity's data found the number of millennial Roth IRA accounts with contributions are up 7.8% so far this year.Importantly, you're able to withdraw your contributions at any time for any reason without penalty or taxes.
Because many young workers are in their lower earnings years, getting a tax deduction for traditional pre-tax retirement contributions is less valuable, Slott said. Plus, you will have to pay taxes on that money later when rates will likely be higher.