Account Types

Brokerage Account

Also known and a taxable investment account. You can easily deposit money in a brokerage account which can be invested for the purpose of both short-term profits and long term goals. There are no limits on contributions or withdrawals.


Individual

One account owner

Joint

This account is shared by two or more individuals such as spouses, family members, or people with the same financial interests.


IRA

An individual retirement account in which your money can grow tax deferred. At the time of your withdrawals you pay ordinary income tax. Withdrawals before age 59.5 may have a 10% Early Withdrawal penalty if certain qualifications are not met. Depending on your income, you may be able to get a tax deduction on your current year’s contribution. A traditional IRA is a good choice for individuals who think they will be in a lower tax bracket in the future. You contribute up to $6,000 per year and an additional $1,000 if you are over 50.


Roth IRA

An individual retirement account in which you contribute money after-tax. When you make a qualified withdrawal from a Roth IRA such as being over 59.5 and having a Roth open for over 5 years, your distribution is tax free. A Roth IRA is a good choice for people who think they will be in a higher tax bracket in the future. You contribute up to $6,000 per year and an additional $1,000 if you are over 50. Income limitations apply.


Rollover IRA

This account enables you to rollover funds from an employer-sponsored retirement plan such as a 401k or 403b to an IRA. By doing this you can avoid paying current taxes or early withdrawals fees at this time and benefit from investment flexibility that IRA’s can bring.


Simple IRA

This account is a type of Traditional IRA for small business and the self-employed. With that the same tax rules apply as a Traditional IRA. In a Simple IRA your contributions are pre-tax and grow taxed deferred thereafter. Withdrawals after age 59.5 are taxed as ordinary income, withdrawals before then may be subject to a 10% early withdrawal penalty. You can contribute up to $15,500 per year. Employers have the option of contributing either a matching contribution up to 3% of your compensation or a non elective contribution of 2% of your compensation that is not based on you contributing to the SIMPLE IRA. This type of IRA is more cost effective for small companies.


SEP IRA

A Simplified Employee Pension is targeted to help self-employed individuals, small businesses and their employees save for retirement. Contributions to this type of account are tax deductible, grow tax deferred and are taxed as ordinary income when you make withdrawals. Similar to other IRA’s there may be a 10% Early withdrawal penalty before age 59.5 if certain qualifications are not met. You can contribute up to $57,000 per year.


401k

An employer-sponsored retirement account. Once 21, an employee can choose a percentage of their pre-tax salary to go into this account each pay period to be invested. The contributed money must stay in the account until the owner is at least 59 ½ or until they leave employment at which point it could move to a Rollover IRA, otherwise they will face early-distribution penalty fees.


403b

Also known as a tax-sheltered annuity plan, a 403b is an employer-sponsored retirement account offered to employees of either non-profit organizations or the government. Once 21, an employee can choose a percentage of their pre-tax salary to go into this account each pay period to be invested. The contributed money must stay in the account until the owner is at least 59 1/2 or until they leave employment at which point it could move to a Rollover IRA, otherwise they will face early-distribution penalty fees.


Trust

This type of account is set up to protect ones assets throughout their lifetime and after death. The trustee controls the trading in the account. Overall investment logistics are typically similar to a brokerage account, however depending on the structure of the trust, there may be additional restrictions. Taxes apply to gains and losses.


Donor Advised Fund

A charitable investment account enabling you to support charitable organizations you care about. The donor of the fund can donate cash, stocks, or non-publicly traded assets tax free. These donations are irrevocable.


HSA (Health Savings Account)

A Health Savings Account is a type of savings account that is used to pay for medical expenses. The money deposited into this account is not taxed.


529 Plan

A college savings account in which the account owner deposits money tax free for future educational use. Withdrawals from a 529 account may be taken at any time but can only go towards qualified education expenses. If the money is used for something else, you would face a 10% federal penalty tax.


UGMA/UTMA

Custodial accounts that function the same as brokerage accounts. Although in many times it is known to be used for education, it doesn’t have to be. Taxes are applied to gains and losses.


Defined Benefit Plan

employer-sponsored retirement plan in which the employer uses a formula to define the retirement benefits ahead of time and set the amount that will be paid out. The employer is responsible for handling the investment risk in this type of pension plan.

Contribution numbers are based off of 2021 numbers