Roth IRA

This article was updated in 2008.

One of the smartest money moves a young person can make is to invest in a Roth IRA. Follow the rules and any money you put into one of these retirement-savings accounts grows absolutely tax free — you won’t owe Uncle Sam a dime as you let your savings accumulate, or when you cash it out in retirement. Plus, an IRA is more flexible than a 401(k) and other retirement plans because you can invest it in almost whatever you want, from stocks and mutual funds to bonds and real estate.

If you haven’t yet opened this gift from Uncle Sam, do it now. The government sets a limit on how much you can contribute to a Roth. That limit is $5,000 in 2008.