So you’re ready to open an IRA! Good for you. I remember being hounded by an ex-boyfriend who couldn’t believe I didn’t already have one until I caved in pretty much just to shut him up. However, it’s turned into a heck of lasting legacy for that relationship.

You probably already know that there are two types of IRAs – Traditional and Roth. The easiest way to look at them is that a Traditional IRA provides you with tax benefits now – you can claim your contributions on your taxes – whereas Roth IRAs provide you with tax benefits later – everything in the account can be withdrawn tax free (provided you are over 59½ and have had the account for at least 5 years).

So why would you ever get a Traditional IRA? Well you have to meet a few requirements to open a Roth IRA. If you’re single, you have to earn less than $114,000 and married couples have to earn less than $181,000. Matt over at Mom and Dad Money has even more reasons you might opt for a Traditional IRA over a Roth IRA.

Traditional and Roth IRAs will penalize you if you withdraw money before you are 59½ and the money will be taxed as regular income. So if you’re in a bind and withdraw $10,000 from your IRA, you would pay a 10% penalty on it (so now it’s $9,000) and that money would then be taxed as income.

However, you can make a withdrawal from a Traditional and Roth IRA under a few select circumstances without getting hit with the penalty:

• To buy or rebuild your first home you can take out up to $10,000 once.
• If you become disabled.
• If you become the beneficiary of someone else’s IRA upon their death.
• If it’s part of a SEPP program.
• For higher education.
• To pay for medical insurance if you lose your job.
• To pay for back taxes.

But since you’re planning on building a retirement nest egg, let’s acknowledge and then ignore the above, because with whichever IRA you choose, I recommend you set it and forget it (mostly – I mean, it does need to be rebalanced once in a while).

Personally, I look at my IRA contributions as buying something. As far as I’m concerned, that money is gone, and wrinkly, retired Mel will just hit the jackpot one day and get it all back – with interest.

 So how do you set up an IRA?

If you’re moderately financially illiterate, like me, I recommend a target date fund. Fidelity Freedom 2050, here I come. You pick what year you want to retire by and then the company you invest with – Fidelity, Charles Schwab, etc. takes care of the rest, keeping it properly balanced.

If you’re really into stocks and funds and all that, though, you can totally select what you want your IRA invested in, you just need to look into self-directed IRAs. This isn’t really the path for most people.

Think of an IRA as a physical building and from there, you decide how to decorate it. The furniture for your IRA is the funds. When you pick an investment firm, they’ll give you a list of lots of different funds. You can buy 1 or 20, it’s up to you. There’s nothing wrong with starting with just one. Don’t let all the options overwhelm you.

Setting up the account is as easy as opening a bank account. Lots of bigger companies require you to put in a hefty sum to get started – between $1,000 to $2,500.

That can be a lot. However, there are a few firms like T. Rowe Price that will let you start out with a small or no contribution as long as you set up an automatic monthly withdrawal that can be as low as $50 a month.

The biggest thing really is to get moving. Make a decision and start investing. Compound interest is awesome! I would put one of those “if you had started saving as a fetus, you’d have this much now” charts here, but they always make me feel bad because I didn’t start saving as a fetus.

The fact is, if you start saving today, you will have more money than if you start saving next week. So what are you waiting for? Get on the path to Scrooge McDuckness!