Research On Different Types Of Investment Accounts

So, maybe you have done some research on different types of investments, but you don't know where to purchase these investments. Typically, in order to purchase different types of investments, you will need to open up an investment account with your bank or an investment brokerage firm. Here are the typical accounts that you can open:

• Individual investment account. This type of account will allow you to buy and sell (on your own or with the help of an advisor) without restrictions; however, there are no tax advantages.
• Individual Retirement Account (IRA). This is a great account to invest money for retirement because it provides tax advantages. The money placed in an IRA is considered pre-tax and you pay no taxes on returns until you take the money out. Because you do not have to pay taxes on your money it will grow larger. You can contribute $4,000 per year tax free. Individuals aged 50 and older can contribute up to 100% of earned income or $5,000 whichever is less. However, if you pull out your money before you reach 59 ½, you will have to pay taxes PLUS you may have to pay an additional penalty.
• Roth IRA. A Roth IRA is similar to a regular IRA, except that it is after-tax money. Therefore, you do not get an additional tax deduction for this type of account. However, after the age of 59 ½, you can pull your money out tax free.
• 401(k) Plan. Many employers offer a 401(k) plan to their employees. This allows you to have money pulled from your paycheck each month and invested in mutual funds before tax. In addition, employers will typically match your investment up to 6% of your income. If your employer offers a 401(k) plan you should be investing as much as possible in it.

If you currently would like to open one of the above mentioned investment accounts, you have many options. For those just getting started, there are many discount brokerages online; such as Scottrade, Zecco, E-Trade, Charles Schwab, and many others. Or there is probably dozens of financial planners or stock brokers in your area that would happy to help you invest your money. (However, do your homework, before choosing any sort of financial advisor).

Investing is an essential part of planning for retirement. Using the time value of money, investments can grow very quickly. The examples below shows what $500 a month earning a return of 6%, 9%, and 12% can do over 30 years:

• $500/mth at 6% for 30 years = $502,257
• $500/mth at 9% for 30 years = $915,371
• $500/mth at 12% for 30 years = $1,747,482

These examples assume no previous savings. As you can see, simply earning the average market return of 12% over the next 30 years will grow your $500 savings into a healthy nest egg of nearly $1.8 million.

Invest with a Plan

Overall, it is important to invest with a plan.

• First, determine how much you need to retire on.
• Second, determine how many years before you plan to retire.
• Third, figure out what type of return you will need to meet your retirement savings goal.
• Fourth, pick investments that you are comfortable with (and will still allow you to achieve your investment/retirement goals).
• Fifth, open the appropriate accounts in order to meet these goals.

In addition, you would be wise to consult a financial advisor. A good advisor will be able to determine which specific funds or investments are appropriate for your individual situation.