So you’ve reached the time in life where you’re out of college, in your first or second full-time job, maybe single, married, or just had your first child. Regardless of what “stage” you’re in, you are probably classified by most as being from the “Millennial” generation. You may be thinking that you’ve just barely entered the adult stage of life, but it could be time to start considering investing for your future, and a Roth IRA may be just the way to go.

What exactly is a Roth IRA?

A Roth IRA is an Individual Retirement Account where you set aside after-tax income up to a set amount per year.

What makes it different from a traditional IRA?

One major difference, and a big reason why Millennials should consider a Roth, is that you are not penalized or taxed on money withdrawn at any time, even before you’re retired. So, let’s say you’ve been trying to create an emergency fund (like many people or advisors have told you), but your monthly bill and loan payments make it next to impossible to save up three months worth of expenses. Having a Roth IRA, however, could essentially serve as both an emergency and retirement fund because in a Roth IRA, you can withdraw funds in an emergency, without being penalized. I say can because while it is possible, it is certainly not advised if you are truly trying to save for retirement, however, the option is available.

Another big difference is that the money you put into the account is after-tax income, meaning, when you withdraw funds on a Roth, taxes have already been taken out of your income and you can take the full amount needed. In a traditional IRA, money deposited into the account may be fully or partially deducted when you place it in the account, but it will be taxed when taken out.

So while a traditional IRA may look appealing to Millennials up front because of the deductions, a Roth is actually saving you from taxes later. More likely than not, you will be paying less taxes earlier in your career (due to lower income) than later. Eventually, you could even reach a point where you make more than allowed to invest in a Roth (eligibility phases out at $118,00 for individuals and $186,000 for a household). And, for a generation who trends toward retiring early, but has less access to 401(k)’s (due to being self-employed or working for a start-up/small business that does not offer one), a Roth IRA may be smarter in the long-term.