Types of Investing Account
Types of Investing Account
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An investor can open brokerage account to house the investment funds in multiple ways
An investor can open brokerage account to house the investment funds in multiple ways
The main brokerage account types are Cash, Retirement, Margin and Options (I use Type 1 and 2)
Type 1: Cash Account (Used as Savings Account)
Type 2: Retirement Account (IRAs, 401k, HSA)
Type 3: Margin Account (Loan using owned stocks)
Type 4: Options Account (Contract to buy/sell)
Retirement Brokerage Accounts
Retirement Brokerage Accounts
(Limited Liquidity: penalty free withdraws only at retirement age defined by IRS)
Traditional = Pre-tax
Traditional = Pre-tax
401k (Est. in 1978; popularized in 1980's)
Rollover IRA
KEY: TAX DEFERRED
+ Pre-tax contribution to account
+ Tax will be owed at time of withdraw
- Penalty if accessing funds before eligible
Roth = After-tax
Roth = After-tax
Roth 401k
Rollover Roth IRA
KEY: GROWS TAX FREE
+ Paid tax before contributing
+ Roth accounts grows tax free
- Penalty if accessing funds before eligible
Health Savings Account
Health Savings Account
Self- owned: HSA & FSA
Employer owned/sponsored : HRA
KEY: TRIPLE TAX ADVANTAGE
+ Tax free HSA checking interest income
+ Contributions reduce taxable income
+ Tax free gains with qualified withdraws
+ No withdraw timing restriction
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