Of course, there’s risk involved in buying stocks in an IRA, but the good news is that if you have a savings window spanning multiple decades, you’re likely to come out ahead in the long run, even if there are years during which your investments lose money or underperform. Furthermore, if you’re really not comfortable hand-picking stocks, you can always revert to stock-focused index funds instead. Those will allow you to benefit from the broad market’s performance, and they’re a good way to get instant diversification in your portfolio.
3. Consider a Roth
If you expect your tax rate in retirement to be higher than it is today, then a Roth IRA absolutely makes sense. With a Roth IRA, your contributions are made with after-tax dollars, but investment gains in your account are yours to enjoy tax-free, as are withdrawals during retirement.
If you’re a higher earner, you may be barred from funding a Roth IRA directly, as there are income limits that come into play. If you’re single, contributions are banned beyond an income of $140,000, and if you’re married filing jointly, the same applies to earnings above $208,000. But even if you can’t contribute to a Roth IRA directly, you can always open a traditional IRA and convert it to a Roth afterward.