Now on days there are a lots of investing accounts you can use, and one of the most important things you have to do before actually starting investing is to find out where do you want investing and what account you need to do so.
If you want to investing in a retirement plan, it won’t be smart to open a normal taxable investing account. And if you want to invest in stocks and funds it won’t be smart to open a retirement investing account.
Be aware that there are also retirement accounts specifically designed for self-employed people.
In this article you will find only the most popular investing accounts because there are far too many accounts to mention if we would go through every single one.
If you want to invest in your retirement then you should look at.
Traditional and Roth IRA
In a traditional IRA accounts you are contributing to a tax-deductible, these distributions which you will find here are taxed as ordinary income.
A Roth IRA is a cousin of the version mentioned above. This one is the cousin so you know that it has something opposite which in this case is the tax treatment. In these accounts your contributions are made after-tax and your money grows tax-free and distributions in retirement are not taxed.
If you have a work you might already have that account because many employers has it for their workers. And how it works is by taking contributions right from your pay-check every month.
Many employers and companies will match their worker’s contributions up to a limit. And if yours does, you should probably contribute at least enough to earn that match before investing elsewhere.
If you’re goal is investing different than retirement then you should look at
Taxable account / normal investing accounts
These accounts are flexible investment accounts and aren’t earmarked for any specific. These accounts accounts gives you the ability to investing for the most part in everything you want no matter if it is stocks, mutual funds, bonds etc.
These accounts have no rules on contribution amounts, and you can take money out at any time. Which is the opposite of retirement accounts.
This type of accounts doesn’t have any specific tax advantages. And these accounts also are taxable. So keep that in mind
College savings accounts
These accounts are almost like retirement accounts. These accounts offer you tax perks for saving for college.
Most college savings use 529 account and a Coverdell education savings account which these accounts provide you.