Opened an IRA? 3 Tips to Start Investing It

It's time to put your savings to work.

You'll often hear it's important to save consistently for retirement during your working years. The reason? Once your career wraps up, you'll need a decent amount of income to maintain the lifestyle you're used to. And chances are, Social Security won't provide enough of it -- even if you manage to snag a decent-sized benefit.

That's where IRAs come in. An IRA, or individual retirement account, lets you sock money aside for the future in a tax-advantaged manner.

IRAs come in two varieties -- traditional and Roth. With a traditional IRA, your contributions to that account are tax free as long as you're under the income limits, and you pay taxes when you remove funds during retirement. Roth IRAs work the opposite way -- there's no tax break on your contributions, but withdrawals aren't taxed.

But the money in your IRA shouldn't just sit in cash. If it does, it may not grow at such an impressive pace. And that could prove problematic once retirement rolls around.

Living costs have a tendency to rise over time due to inflation. You'll want to make sure you're investing your IRA so your money has a chance to keep pace with inflation (or, more ideally, outpace it).

If you've only recently opened your IRA, you may not know how to approach the process of investing your money. Here are three tips that can help you get started.

1. Choose your investments based on your savings window

As a general rule, it's a good idea to invest your IRA more aggressively when retirement is many years away, and then take a more conservative approach as retirement nears. To get started investing, figure out how many years away from retirement you are.

If you're in your 50s and want to retire in less than a decade, you may not want to go all that heavy on stocks, since they can be volatile. But if you're in your 30s and have no plans to tap your IRA for a solid three decades, then it pays to focus more on stocks, whose returns tend to be far more generous over long time periods than what bonds deliver.

2. Think about your appetite for risk

You need to invest your IRA in a manner that makes it possible to sleep at night. Even if retirement is many years away, you may not feel comfortable putting the bulk of your money into stocks.

To be clear, you should really, in that case, push yourself to put some of your money into stocks. But the way you allocate your money specifically should also hinge on your personal comfort level. If you go too heavy on stocks, you might dump those stocks in a panic when the market tumbles, thereby locking in losses and stunting your savings' growth.

3. Make sure to diversify

If you're going to buy stocks for your IRA, it's important to make sure you're investing in a range of market segments. If you stick to one type of stock specifically, you could limit your ability to grow your money and subject yourself to losses.

How can you build a diverse IRA portfolio? You can aim to buy anywhere from 15 to 25 stocks and make sure they represent different corners of the market. That could mean owning five tech stocks, five energy stocks, five healthcare stocks, five bank stocks, and five consumer staples stocks, as one example.

ETFs, or exchange-traded funds, are another option if you want to diversify your IRA. ETFs allow you to invest in a bunch of different companies at once. For example, you can buy shares of an S&P 500 ETF, and that will effectively mean you're investing in the 500 different companies the S&P 500 is composed of.

Funding an IRA is a great way to set yourself up for a financially stable retirement. But it's important to invest the money you have in that account, and these three tips should help you get the ball rolling.