Ready to Invest, Now Where Do I Do That?

Now that you’re ready to invest for your long term goals you’ll need to choose where to do that. We don’t mean what to invest IN, that’s a different topic. WHERE you invest matters a lot too. There are special accounts for different purposes that can really make a difference in how much money you’ll end up with when you need it. Here are some of the most common places you can invest:

A Brokerage Account – this is a plain, no-frills, no tax advantages account for buying and selling investments. You can open one at almost any large financial institution (they’ll be happy to help you set one up.)

401(k) – your workplace retirement account is, no surprise, a great place to invest for retirement. Contributions are pre-tax and grow tax-free until withdrawn. Some employers offer a match on contributions up to a point, and some 401(k) plans have a Roth option that flips the tax advantage – making withdrawals tax-free but contributions taxable.

Individual Retirement Account (IRA) – a retirement account for individuals that isn’t affiliated with your employer. Traditional IRAs feature tax deductible contributions but withdrawals are taxed. Roth IRAs flip that; contributions are made with after tax dollars but withdrawals aren’t taxed. Both offer tax free growth for investments in the account. The contribution limits are lower than a 401(k) and phase out at certain income levels but this is a good option for investing for retirement if you don’t have access to a 401(k) or want to supplement it.

529 Plan – an account for saving and investing for college. Many people open 529s for their children as a more tax efficient way to put away money for college. Contributions aren’t tax deductible but the investments grow tax-free and qualified withdrawals (ones that are used for education expenses) are tax-free too.

Health Savings Account (HSA) – If you have an HSA, this is sneakily one of the best options for investing available. They have a triple tax advantage; contributions are tax deductible, the investments grow tax-free, and qualified withdrawals for medical expenses aren’t taxed either!

These are just a few of the most common investment accounts and the basics of the advantages of each. If you have questions or want to learn more about any of these chat with a BrightDime coach!