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Every year, you get one opportunity to take a huge step forward toward securing a comfortable retirement. But while it's still not too late to take action now, this opportunity will be gone before you know it -- and you won't have another chance to turn back the clock.

The best way to invest
There's never been a more important time to save for the future than right now. When you look at the other pillars that have traditionally helped people make ends meet after they retire, you've seen a lot of disconcerting news lately. Government programs like Social Security and Medicare are on the road to financial ruin, and it's unclear what, if anything, can be done to turn the tide. Those who are lucky enough to have pensions, whether they come from private employers or public entities, have to worry about the prospects of their pension funds not earning enough to pay out the benefits they've promised.

That leaves you on your own when it comes to reliable retirement investing. And when you weigh all the alternatives for most people, the best place to put that retirement money is in an IRA.

What about that free money?
I'll admit that there are some lucky workers for whom an alternative to IRAs may seem like an even better bet. If you have a 401(k) plan where your employer is willing to add its own money to your contributions -- whether it's through employer matching or via profit-sharing provisions -- then that's probably the best deal you'll get.

But for most people, that shouldn't preclude opening an IRA. It's a rare employer that offers a match on more than the first 3% to 6% that you contribute. Given that most people should probably be putting aside 10% to 15% of their salaries toward saving for retirement, you've got plenty of room left to add an IRA to your investment mix.

Do what you want
More importantly, IRAs give you flexibility that is sadly lacking in most 401(k) plans. Typically, a 401(k) leaves you stuck with just a few investment choices, most often mutual funds. A combination of high fees, often times inappropriate investments, and a lack of transparency could leave you at a severe handicap in managing your portfolio within a 401(k).

Conversely, IRAs let you invest in a wide variety of different investments. Consider the range of choices you have:

  • You can buy pretty much any individual stock you want.
  • Rather than being stuck with mutual funds that your employer picks for you, you can typically invest directly in any of thousands of funds on your own.
  • Want to invest in gold? Not only can you invest in gold mining companies or ETFs like SPDR Gold Trust (NYSE: GLD  ) , but you can even own certain gold coins in IRAs -- as well as silver, platinum, and palladium.
  • Similarly, investing in real estate is a real possibility in an IRA. Not only can you choose top-quality REITs like AvalonBay Communities (NYSE: AVB  ) and Boston Properties (NYSE: BXP  ) , but you can also directly hold investment properties if you find a trustee willing to act on your behalf.
  • You can even bet against the market if you want. IRAs don't let you sell stocks short, but by using inverse ETFs, you can buy shares that will rise in value when certain stocks they track fall. For instance, say you want to join those whose bets against Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) have vaulted those stocks to the top of the NYSE short-interest list. To do so, you could buy shares of ProShares Short Financials (SEF). That inverse ETF would bring you profits if they and other financial stocks, including JPMorgan Chase (NYSE: JPM  ) and Goldman Sachs (NYSE: GS  ) , go down.

With IRAs, you can truly hold a diversified portfolio. You simply can't find the flexibility that IRAs offer in any other tax-favored retirement account.

Do it today
The other benefit of IRAs is that you get a little extra time to set one up. Even though you can no longer make 401(k) contributions for 2009, you get until April 15 to open an IRA for last year.

So don't delay. All it takes is $5,000 to fully fund your IRA -- and by doing so, you'll get yourself further down the path toward a prosperous retirement.

When it comes to retirement, you can't afford mistakes. Let John Rosevear show you how to avoid one of the biggest mistakes you'll ever make.

Fool contributor Dan Caplinger often gets in under the wire with great deals, but IRAs aren't something he puts off. He doesn't own shares of the companies mentioned. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy never expires.


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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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