As college students, there is probably a good chance the thought of saving for retirement is one that has never come close to crossing their minds. Understandably, their thoughts are probably much more focused on even getting a job to retire from.

However, many experts say it is important to start saving as soon as possible. According to an article on money.cnn.com, an ideal time to begin saving is after graduation when first receiving paychecks from a job. The article really stresses the concept of the earlier you begin saving, the better. 

Of course, the first step to saving for retirement would be to open a retirement-oriented savings account. A great option for this would be to look into opening a Roth IRA account.

Basically, a Roth IRA is a retirement account that offers tax-free growth potential. The money is taxed when you first put it into the account, however, the money you withdraw from it is not taxed. This differs from more traditional tax-advantaged retirement plans, which typically grant a tax reduction for money placed into the account. Because of the Roth IRA’s method, interest gains from the account are tax free.

If you want a more traditional route with your retirement plan, you will seek a job that offer a traditional 401k or Roth 401k plans.

With a traditional 401k, you get a number of choices for investment options, and any contributions and earnings from those investments are tax-deferred. These taxes get paid when the savings are withdrawn. Another benefit of this account is that most employers will match a portion of the account’s contributions, which are also tax-deferred until withdrawn.

A Roth 401k plan differs from the traditional in that the contributions are not tax deferred but are instead made with after-tax dollars. This makes the income the account earns through interest, dividends or capital gains, tax free.

However, if you come across the opportunity to have an employee-sponsored retirement plan, you should also still consider opening a Roth IRA as well. One of the most significant reasons for this is tax diversification. It is important to pay attention to the IRS’s maximum annual contribution, which applies to both accounts.

Rachel Futterman | The Oswegonian