by: Amy Fontinelle

If you’re a Millennial, two of the retirement savings options available to Americans are particularly good for you. The decades before you’ll need the money means you don’t have to save that much to end up with a sizeable fund down the road. Look at these two options.

Roth IRA

The first good bet is a Roth IRA. This tax-advantaged savings plan is available to anyone with earned income who meets certain income standards that are probably easy to meet early in your work life (for example, a single person has to earn a modified adjusted gross income of $129,000 in 2014 to be disqualified).

You can contribute up to $5,500 in after-tax income to a Roth IRA for 2014, and the limit usually increases every couple of years to account for inflation and higher costs of living. If you’re just starting to work or you were unemployed for part of the year – and your taxable compensation was less than $5,500 –  the most you can contribute to a Roth IRA for the year is your total taxable compensation. So if you earned $4,000 for the year from a part-time summer job, the maximum you can put in is $4,000.

Saving for retirement through a Roth IRA is a great idea because you can invest your contributions and watch them grow tax-free. The tax break on investment gains helps your nest egg grow larger, faster. Also, when you start taking distributions from your Roth IRA in retirement, you won’t pay any taxes on the money you take out, since you already paid taxes on your contributions during your working years. If your Roth IRA balance is $1 million when you reach retirement, that entire $1 million is yours; none of it belongs to the government. Saving and investing in a Roth IRA makes it easy to see how much money you’ll have to work with in the future.

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