A Guide to Investment Accounts
Setting aside money now is the best way to be prepared for your future milestones. Consider adding brokerage, retirement and education accounts to your savings portfolio.
Bottom Line Up Front
- There are different investment accounts you can use to build your savings.
- Typically managed by industry professionals, brokerage accounts can include mutual funds, stocks and bonds.
- Retirement accounts like IRAs and Roth IRAs can have the same investment categories as brokerage accounts.
- Education accounts are set up to cover expenses-related education. Some can be used from kindergarten through college, while others are designed specifically for higher education expenses.
Time to Read
May 5, 2022
Most of us agree that the sooner you start putting money aside for your future, the more opportunities you’ll have for growth. And, investment accounts can help you reach your goals faster. You don’t have to choose just 1 type. You can have 1 or any combination in your financial portfolio. Let’s talk about some different types of investment accounts.
A brokerage account is where you hold and trade your investments in mutual funds, stocks and bonds. Brokerage accounts are usually managed by industry professionals. You can get advice and services through licensed stockbrokers. They also can act as your agent in buying or selling. Another option is to find a digital service—where you can manage your own portfolio or have technology make your investment decisions.
Although you may not have realized it, learn more about retirement accounts are investment accounts, too. The most common are traditional IRAs and Roth IRAs. They often have the same types of investments as a standard brokerage account. Both are known as tax-advantaged accounts. The difference is how and when you pay taxes. Many people choose based on whether they think they’ll be in a higher tax bracket now or when they retire.
- Traditional IRAs: These are tax-deferred accounts. That means you get to deduct what you contribute to a traditional IRA on your tax return each year, but you pay taxes on your withdrawals at retirement.
- Roth IRAs: You use your after-tax money to make your retirement contributions, so you won’t have to pay taxes on your withdrawals at retirement.
Parents, grandparents and others who want to put money aside as a hedge against inflation and increasing higher education costs often open an learn more about an education account. Some like 529 plans and Coverdell accounts are tax-advantaged savings accounts. Some are set up specifically for higher education. Others can cover education expenses from kindergarten through college.
A financial advisor can help you decide how much to save and which option would work best for you.
Adults who wish to create an account for a minor can open a custodial account. They may be used for education or just as a general gift to be held for the future. The donor chooses a custodian to manage how and where the funds are spent or invested. The money can be invested in a variety of assets at a bank, credit union or brokerage house. They can be easier and less costly than setting up a trust fund.
Boost What You Know About Investment Accounts
There are a variety of investment accounts you can use to reach your savings goals. Your goals, risk tolerance and available funds will determine your investment strategy. Navy Federal Investment Services can help you with financial planning and investment services.
Navy Federal Financial Group, LLC (NFFG) is a licensed insurance agency. Non-deposit investments, brokerage, and advisory products are only sold through Navy Federal Investment Services, LLC (NFIS), a member of FINRA/SIPC and an SEC-registered investment advisory firm. NFIS is a wholly owned subsidiary of NFFG. Insurance products are offered through NFFG and NFIS. These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of Navy Federal Credit Union (NFCU), are not offered, recommended, sanctioned, or encouraged by the federal government, and may involve investment risk, including possible loss of principal. Deposit products and related services are provided by NFCU. Financial Advisors are employees of NFFG, and they are employees and registered representatives of NFIS. NFIS and NFFG are affiliated companies under the common control of NFCU. Call 1-877-221-8108 for further information.
This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.