Types Of Investment Accounts 2021 [The Complete Guide]
This is a complete list of types of investment accounts in 2021.
Sometimes, it isn't easy to know which investment account is the best for you. There are so many types of investment accounts out there that it can be hard to figure out what type you need and why.
This blog post will go into detail on the different types of investment accounts, their benefits, and who should invest in each one. There are four types of investment accounts: Individual brokerage account, IRA, 410K, and 529 College Savings Account.
So these are the four different types of investment accounts. The first type is the Individual brokerage account, which is just that: an account for a single individual to invest with brokers.
The benefit of this kind of account is that it's completely separate from any retirement or other savings plan you may have and allows for more investment freedom than most plans offer. Below we have listed the types of investment accounts.
Types of Investment Accounts — Complete Guide
Individual Brokerage Account
An individual broker account is one in which a single person invests with brokers. The benefit to this kind of account is that it's completely separate from any retirement or other savings plan you may have and allows for more investment freedom than most plans offer.
Opening an individual brokerage account is a little easy process. An individual brokerage account has a lot of benefits, but it also comes with some disadvantages that you should be aware of before opening one up:
- You're on your own when it comes to choosing which stocks or bonds to invest in; the investment decisions are left completely up to you, and there's no help from anyone else.
- If anything goes wrong with a company for which you've purchased stock, there's nobody who can fix things because the investments in this type of account are solely yours. This means if something happens like one company going bankrupt, you'll end up losing everything invested even though everyone was affected by what happened at the business.
- In order to open an IRA (individual retirement account)
An account designed to help users save for retirement, typically by investing in stocks or bonds.
- You need to have earned income each year, and your contributions are limited depending on the type of IRA you're using; this is not an option if you don't make enough money.
- There can be penalties because usually there's a set deadline when it comes time to withdraw funds from these types of accounts, which means that even though you've contributed the same amount as someone else who opened up any other investment account, they might end up with more than what you do at some point down the line because their investments were allowed more time to grow over those years.
The rules for tax-advantaged accounts can be tricky. Here are a few to keep in mind with IRAs.
- You may need to take a required minimum distribution (RMD) before age 70.
- Contributions are limited depending on the type of IRA you're using and whether or not you have any earned income each year; this is not an option if you don't make enough money.
Contributions may be tax-deductible. You will not need to take an RMD in retirement; the contributions are withdrawn first (and taxes are paid on them).
Traditional IRA: Contributions might not be tax-deductible, but you'll only pay taxes when withdrawing at a later date.
SEP IRA: This option is available for self-employed individuals with no employees and provides both benefits of traditional IRAs as well as Social Security coverage if your employer doesn't offer it or you're self-employed without other income that would qualify you for this benefit.
SIMPLE IRA: These accounts can have lower investment requirements than SEPs because they usually don't allow rollovers from 401(k)s and offers smaller employers the ability.
A 401k is an account that your employer sets up for you or an account that'll match a portion of what you contribute. As an employee, you'll have to pay these taxes on your own.
401k a specific % of your income that you are taxed on you will contribute to the account and a percentage that your employer will match.
A 403(b) is similar to 401k, which public schools, universities, or other tax-exempt employers can offer. As an employee in this situation, you'll still have to pay these taxes on your own.
Employee 401k accounts are a type of investment account. These types of accounts are tax-deferred or deducted from regular income taxed at your standard rate and then put into an account where the investments can grow without you having to pay taxes on them until you withdraw money out.
Retirement plans including 401ks, 403bs, or pensions all follow this same basic principle with some variation in taxation rates depending on how much is contributed by both employer and employee each year.
The contribution limits for Employee Retirement Plans (ERPs) depend on what kind it is and whether there's one set up through a private company plan, such as United Airlines Federal Savings Bank Profit Sharing Plan B.
Other Corporate Sponsored Accounts
Below we have listed other rare common accounts that companies offer their employees:
- Solo 401k
- SEP IRA
- Simple IRA
529 College Savings Account
Last on our list is the 529 college savings account. It does not have to be used for college tuition only. You can use this account similar to an Individual Retirement Account (IRA) and make contributions up until the age of 18 for that child's education or another purpose.
This account is designed to help save for a beneficiary’s future college tuition, home, etc., and is otherwise known as an education savings account.
With so many different types of investment accounts available, it can be difficult to know which one is best for you. One thing that’s certain, though, because the more control you have over your investments, the better.
In this blog post, we took a look at some of the most popular account types and what makes them unique from one another. Let us know in the comment below if there are any other questions or topics you would like to see covered on our blog!