Investment accounts are a beneficial way to plan for the future and strengthen your financial status. Investment accounts can include stocks, bonds, and retirement accounts. People often choose to enlist the help of an investment broker to help navigate the somewhat complex world of investing.
There are a few things that you should keep in mind when looking for an investment broker as well as different kinds of investment accounts that may be beneficial for you.
What is an Investment Account?
An investment account is a kind of financial account that allows you to accrue money over time. These accounts often have favorable interest rates, which makes savings over time worthwhile. There are investment accounts that allow your employer to match your contribution to the account, so that you are maximizing how much money you are able to save.
What Kind of Investment Accounts are there?
There are a few different kinds of popular investment accounts. Three of these investment accounts include an IRA, a Roth IRA, and a 401(k).
An IRA, or independent retirement account, provides tax benefits in addition to savings. There are restrictions as to how much you can put into a traditional IRA account in a specific year, as well as restrictions on how much could be taken out. An IRA lets account holders defer the taxes they pay on their investments. Money that goes into an IRA isn’t taxed until you start to take money out. Account holders can deduct the annual amount they put into their account from their taxes. Other restrictions include: being younger than 70 ½ years and receiving taxable compensation. There is a 10% additional tax on money withdrawn from an IRA before you are 59 ½ years old.
Roth IRAs are different from a traditional IRA in that they allow the account holder to invest the money they’re already paid taxes on, so they can withdraw the money later without having to pay taxes on it. You can’t deduct your annual investments on your taxes with a Roth IRA. Roth IRAs have income restrictions that might keep some people from choosing this option. They also have a 10% tax penalty for taking money out before you’re 59 ½. You have to wait five years after your first contribution to take money out. No Minimum distributions.
A 401(k) is one of the most well-known employer-sponsored investment accounts. A 401 (k) plan is overseen by an employer, so while your employer picks the types of investments that are available, the employee can invest their money in the way they want to.
Employers may match the contributions that employees make to their 401(k) accounts. Many companies require employees to work for a certain amount of time before they are able to match their contributions. There are rules and restrictions when it comes to funding a 401(k) as well as requirements for withdrawing money. Account holders can withdraw money penalty free when they are 59 ½ years old.
401(k)s could be Traditional or Roth in nature, which could change your investment options through your employer.
What to Consider
Investing requires a few considerations before you dive in. You want to make sure that you know how much money you can afford to put towards your investments, as your budget could preclude you from investing in certain accounts that have a minimum starting investment.
Your broker will be able to point you towards different assets that may be best for you to invest in. Individual stocks, exchange-traded stocks, and mutual funds are all options. You will also need to consider how often you plan on engaging with your investments.
Why do I need an investment broker?
An investment broker is someone who is tasked with looking at your budget and your financial goals and advising you on which investment options will be the most beneficial. Beginning investors might find that the range of options is overwhelming, and they might not know where to start investing. A broker can take a look at your situation and customize an investment strategy with your budget and goals in mind.
A broker can also be slightly more hands off, providing you with options and direction without being totally in charge of the money you are able to invest. This allows you to learn the markets and see what investment paths you can take, without leaving your investments entirely up to the broker.
Before choosing a broker to work with, make sure you search around and find a broker that you work well with. You should trust the person that you are giving your investment money over to. Make sure they have the experience and skills you trust to invest your money.