With our baby boomer-in-chief turning 60 earlier this summer and the boomer generation marking that same milestone this year, we're providing a number of articles that might be useful to this noteworthy generation. This article was published on Dec. 14, 2005.

It's kind of important to know your stuff when it comes to money. Consider IRAs. You may know the bare basics: that an IRA can help you build a secure retirement. But if that's all you know, you may end up sending your $4,000 contribution for 2005 to the wrong IRA -- perhaps to the International Reading Association, the Intercollegiate Rowing Association, the Inflammation Research Association, or the Illinois Restaurant Association. You get the idea -- ignorance is fraught with peril. (Though some of these outfits may actually put your money to good use, they won't help with your retirement.)

Below you'll find a quick guide to some high-profile IRAs, with some pointers to help you invest your hard-earned money effectively.

Traditional IRA
For 2006, you can contribute up to $4,000 (if you meet certain qualifications) -- $5,000 if you're 50 or older. Do so, and the amount you contribute is deducted from your income -- and therefore isn't taxed. If you're in the 25% tax bracket, contributing $4,000 will knock $1,000 off your taxes in 2006. (You'll eventually be taxed on the IRA money when you begin withdrawing it.)

Roth IRA
For many of us, the Roth IRA is an even better option. You plunk post-tax money into it, so you get no up-front tax benefit. But if you appreciate delayed gratification, get this -- the money you eventually withdraw will be tax-free. So imagine that you opened a Roth IRA account (which you can do at most brokerages -- we can help you find one that charges very low commissions) and invested $4,000 in Valero Energy (NYSE:VLO) stock. Valero stock has nearly septupled over the past five years. Let's say that it increases in value tenfold over the next 20 years (that's roughly 12% annual growth), leaving you with $40,000 in your IRA. If your gain of $36,000 were taxed at current long-term capital gains rates, you'd probably be looking at a tax bill of more than $5,000. But since it's in a Roth IRA, your tax is ... zero!

Learn more
There's a lot to learn and a lot to like about IRAs. Learn much more in our IRA Center, which features info on the various kinds of IRAs, eligibility restrictions, and how to open an IRA. It even offers a comparison chart for IRA accounts at TDAmeritrade (NASDAQ:AMTD), E*Trade (NYSE:ET), and Sharebuilder, permitting you to see fees and other data at a glance.

As the Baby Boomers reach retirement age, certain health care and financial stocks are poised for growth. Our top analysts share their best stock picks in this special report The Big Boom: Explosive Opportunities in Biotech and Health Stocks.

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This article was updated by Fool sector head Joey Khattab. He does not own shares of the companies mentioned. The Fool has a disclosure policy.