Advice for opening an IRA as a newbie
First, a Roth is funded with post tax money. The Roth IRA deposit will not offset any tax obligation you might have.  The IRA is not an investment, it's an account with a specific set of tax rules that apply to it. If you don't have a brokerage account, I'd suggest you consider a broker that has an office nearby. Schwab, Fidelity, Vanguard are 3 that I happen to have relationships with.  Once the funds are deposited, you need to choose how to invest for the long term. The fact that I'd choose the lowest cost S&P ETF or mutual fund doesn't mean that's the ideal investment for you.  You need to continue to do research to find the exact investment that matches your risk profile. By way of example, up until a few years ago, my wife and I were nearly 100% invested in stocks,  mostly the S&P 500. When we retired, four years ago, I shifted a bit to be more conservative, closer to 80% stock 20% cash. If you want to 'offset' current (2016) income, only deductible contribution to a traditional IRA does that. You can make nondeductible contributions to a trad IRA, and there are cases where that makes sense for the future and cases where it doesn't, but it doesn't give you a deduction now. Similarly a Roth IRA has possible advantages and disadvantages, but it does not have a deduction now. Currently he maximum is $5500 per person ($6500 if over age 50, but you aren't) which with two accounts (barely) covers your $10k.  To be eligible to make this deductible traditional contribution, you must  have earned income (employment or self-employment, but NOT the distribution from another IRA) at least the amount you want to contribute NOT have combined income (specifically MAGI, Modified Adjusted Gross Income) exceeding the phaseout limit (starts at $96,000 for married-joint) IF you were covered during the year (either you or your spouse) by an employer retirement plan (look at box 13 on your W-2's). With whom. Pretty much any bank, brokerage, or mutual fund family can handle IRAs. (To be technical, the bank's holding company will have an investment arm -- to you it will usually look like one operation with one name and logo, one office, one customer service department, one website etc, but the investment part must be legally separate from the insured banking part so you may notice a different name on your legal and tax forms.) If you are satisified with the custodian of the inherited IRA you already have, you might just stay with them -- they may not need as much paperwork, you don't need to meet and get comfortable with new people, you don't need to learn a new website. But if they sold you an annuity at your age -- as opposed to you inheriting an already annuitized IRA -- I'd want a lot of details before trusting they are acting in your best interests; most annuities sold to IRA holders are poor deals. In what. Since you want only moderate risk at least to start, and also since you are starting with a relatively small amount where minimum investments, expenses and fees can make more of an impact on your results, I would go with one or a few broad (= lower risk) index (= lower cost) fund(s). Every major fund familly also offers at least a few 'balanced' funds which give you a mixture of stocks and bonds, and sometimes some 'alternatives', in one fund.  Remember this is not committing you forever; any reasonable custodian will allow you to move or spread to more-adventurous (but not wild and crazy) investments, which may be better for you in future years when you have some more money in the account and some more time to ponder your goals and options and comfort level. "As other people have indicated, traditional IRAs are tax deductable for a particular year. Please note, though, that traditional IRAs are tax deferred (not tax-free) accounts, meaning that you'll have to pay taxes on any money you take out later regardless of why you're making the withdrawal. (A lot of people mistakenly call them tax free, which they're not). There is no such thing as a ""tax-free"" retirement account. Really, in terms of Roth vs. Traditional IRAs, it's ""pay now or pay later."" With the exception of special circumstances like this, I recommend investing exclusively in Roth IRAs for money that you expect to grow much (or that you expect to produce substantial income over time). Just to add a few thoughts on what to actually invest in once you open your IRA, I strongly agree with the advice that you invest mostly in low-cost mutual funds or index funds. The advantage of an open-ended mutual fund is that it's easier to purchase them in odd increments and you may be able to avoid at least some purchase fees, whereas with an ETF you have to buy in multiples of that day's asking price. For example, if you were investing $500 and the ETF costs $200 per share, you could only purchase 2 shares, leaving $100 uninvested (minus whatever fee your broker charged for the purchase). The advantage of an ETF is that it's easy to buy or sell quickly. Usually, when you add money to a mutual fund, it'll take a few days for it to hit your account, and when you want to sell it'll similarly take a few days for you to get your money; when I buy an ETF the transaction can occur almost instantly. The fees can also be lower (if the ETF is just a passive index fund). Also, there's a risk with open-ended mutual funds that if too many people pull money out at once the managers could be forced to sell stocks at an unfavorable price."
"First off, high five on the paycheck.  There are a few retirement issues to deal with. 401k issues - At that income level, you will probably fall into the ""Highly Compensated Employee"" category, which means things get a little more complicated, both for you and your employer.  (Wikipedia link) IRA issues - As you already realized, you make too much to directly open and contribute to a Roth IRA.  You can open a Traditional IRA, however.  Your income is already over the limit for Traditional IRA deduction (bummer), so it would seem there is little point to opening an IRA at all. However, there is a way to take advantage of a Roth IRA, even at your income level.  It is possible to convert a Traditional IRA into a Roth IRA.  There used to be income limits on the ability to do the conversion, which would have normally made this off limits to you.  Starting in 2010, the income limit is removed, so you can do this. Basically, you open a Traditional IRA, max it out, then convert it to a Roth.  Since there was no income deduction, you shouldn't have to pay any more taxes.  (link) Disclaimer: I've never tried this, nor do I know anyone who has, so you might want to research it a bit more before you try it yourself." "A Roth IRA is simply a tax-sheltered account that you deposit funds into, and then invest however you choose (within the limits of the firm you deposit the funds with). For example, you could open a Roth IRA account with Vanguard.  You could then invest the $3000 by purchasing shares of VOO, which tracks the S&P 500 index and has a very low expense ratio (0.04 as of last time I checked).  Fidelity has a similar option, or Schwab, or whatever brokerage firm you prefer. IRAs are basically just normal investment accounts, except they don't owe taxes until you withdraw them (and Roth don't even owe them then, though you paid taxes on the funds you deposit).  They have some limitations regarding options trading and such, but if you're a novice investor just looking to do basic investments, you'll not notice.   Then, your IRA would go up or down in value as the market went up or down in value. You do have some restrictions on when you can withdraw the funds; Roth IRA has fewer than a normal IRA, as you can withdraw the capital (the amount you deposited) without penalty, but the profits cannot be withdrawn until you're retirement age (I won't put an actual year, as I suspect that actual year will change by the time you're that old; but think 60s). The reason not to invest in an IRA is if you plan on using the money in the near future - even as an ""emergency fund"".  You should have some money that is not invested aggressively, that is in something very safe and very accessible, for your emergency fund; and if you plan to buy a house or whatever with the funds, don't start an IRA.  But if this is truly money you want to save for retirement, that's the best place to start. **Note, this is not investment advice, and you should do your own homework prior to making any investment.  You can lose some or all of the value of your account while investing." In addition to George Marian's excellent advice, I'll add that if you're hitting the limits on IRA contributions, then you'd go back to your 401(k). So, put enough into your 401(k) to get the match, then max out IRA contributions to give you access to more and better investment options, then go back to your 401(k) until you top that out as well, assuming you have that much available to invest for retirement. The investments offered in 401K are usually limited to a selection of mutual funds offered by a 401K provider.  The 401K providers and the mutual funds charge fees.  The mutual fund industry has a lobbying group that will push for increased 401K contributions to direct money into their mutual funds to collect fees.  The top 401 K provider in 2005 was fidelity.  It managed $337 billion in 401Ks of which $334 billion was directed into mutual funds. Although I would have to use some of the same providers to open an IRA, I would not have to invest in the providers' mutual funds when I open an IRA.  I can buy a stock and hold onto it for 10, 20, 50 years inside of my IRA.  Thus, the only fee the investment company would collect from me would be from when I purchased the stock and when I sold the stock.  Not nearly as profitable as mutual fund fees. You can buy stocks in the IRA, similarly to your regular investment account. Generally, when you open an account with a retail provider like TDAmeritrade, all the options available for you on that account are allowable. Keep in mind that you cannot just deposit money to IRA. There's a limit on how much you can deposit a year ($5500 as of 2015, $6500 for those 50 or older), and there's also a limit on top of that - the amount you deposit into an IRA cannot be more than your total earned income (i.e. income from work). In addition, there are limits on how much of your contribution you can deduct (depending on your income and whether you/your spouse have an employer-sponsored retirement plan). "The most important thing is to start.  Don't waste months and years trying to figure out the ""optimal"" strategy or trying to read all the best books before you start.  Pick a solid, simple choice, like investing in your company sponsored 401(k), and do it today.   This I Will Teach You To Be Rich post on barriers has some good insight on this." "I got started by reading the following two books: You could probably get by with just the first of those two. I haven't been a big fan of the ""for dummies"" series in the past, but I found both of these were quite good, particularly for people who have little understanding of investing. I also rather like the site, Canadian Couch Potato. That has a wealth of information on passive investing using mutual funds and ETFs. It's a good next step after reading one or the other of the books above. In your specific case, you are investing for the fairly short term and your tolerance for risk seems to be quite low. Gold is a high-risk investment, and in my opinion is ill-suited to your investment goals. I'd say you are looking at a money market account (very low risk, low return) such as e.g. the TD Canadian Money Market fund (TDB164). You may also want to take a look at e.g. the TD Canadian Bond Index (TDB909) which is only slightly higher risk. However, for someone just starting out and without a whack of knowledge, I rather like pointing people at the ING Direct Streetwise Funds. They offer three options, balancing risk vs reward. You can fill in their online fund selector and it'll point you in the right direction. You can pay less by buying individual stock and bond funds through your bank (following e.g. one of the Canadian Couch Potato's model portfolios), but ING Direct makes things nice and simple, and is a good option for people who don't care to spend a lot of time on this. Note that I am not a financial adviser, and I have only a limited understanding of your needs. You may want to consult one, though you'll want to be careful when doing so to avoid just talking to a salesperson. Also, note that I am biased toward passive index investing. Other people may recommend that you invest in gold or real estate or specific stocks. I think that's a bad idea and believe I have the science to back this up, but I may be wrong." "If you have wage income that is reported on a W2 form, you can contribute the maximum of your wages, what you can afford, or $5500 in a Roth IRA.   One advantage of this is that the nominal amounts you contribute can always be removed without tax consequences, so a Roth IRA can be a deep emergency fund (i.e., if the choice is $2000 in cash as emergency fund or $2000 in cash in a 2015 Roth IRA contribution, choice 2 gives you more flexibility and optimistic upside at the risk of not being able to draw on interest/gains until you retire or claim losses on your tax return).  If you let April 15 2016 pass by without making a Roth IRA contribution, you lose the 2015 limit forever.  If you are presently a student and partially employed, you are most likely in the lowest marginal tax rate you will be in for decades, which utilizes the Roth tax game effectively.   If you're estimating ""a few hundred"", then what you pick as an investment is going to be less important than making the contributions.  That is, you can pick any mutual fund that strikes your fancy and be prepared to gain or lose, call it $50/year (or pick a single stock and be prepared to lose it all).  At some point, you need to understand your emotions around volatility, and the only tuition for this school is taking a loss and having the presence of mind to examine any panic responses you may have.  No reason not to learn this on ""a few hundred"".  While it's not ideal to have losses in a Roth, ""a few hundred"" is not consequential in the long run.   If you're not prepared at this time in your life for the possibility of losing it all (or will need the money within a year or few, as your edit suggests), keep it in cash and try to reduce your expenses to contribute more.  Can you contribute another $100?  You will have more money at the end of the year than investment choice will likely return."