A Roth individual retirement account is one of the best ways for millennials to begin saving for old age, according to financial advisor Winnie Sun.
"It's the perfect framework to get you started to save for retirement, while giving you lots of liquidity and options between point A and point Z," said Sun, founder of Sun Group Wealth Partners.
You contribute taxed income to a Roth IRA and usually can take tax-free withdrawals once you're age 59½ or older. With a traditional IRA, you pay taxes on your withdrawals instead of your contributions.
Advisors often recommend that younger people opt for the former, on the theory that your tax liability will be lower in retirement than when you're starting and moving through a career.
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In addition, a Roth IRA comes with more advantages, Sun said.
"The Roth IRA actually allows you to take distributions from it in case of emergency," Sun said. "The amount that you can take out is what you put in. So let's say you were to put $5,500 in," she added. "You can take that amount [out] at any time without penalty [or] fees."
Sun cautioned, however, that "the profit on the $5,500, you don't want to touch — you want to leave that and let it grow until you're at least 59½, because then you'll get 100 percent tax-free growth on that."
Either type of IRA account, she said, is a better place to build your nest egg than a regular savings account.
"Every bit that you put in, regardless if it's a traditional IRA or a Roth IRA, won't grow tax-deferred and so you're making a difference — a real difference — for your own retirement from day one," Sun said.
How much should you save each year? Always more than you think is possible, Sun said.
She added: "Max out every single year if you can, as long as you don't go into debt."
But keep in mind the IRA contribution limits: $5,500 a year if you're under 50, and $6,500 if you're older.