What Kind of Accounts?

What Kind of Accounts?

I would assume you already have some sort of checking and savings account through a local bank, or even a Citizens, PNC, Dollar Bank, etc.. That is a good start, but in my opinion there are better banks to keep your cash at. I personally use Fidelity, but there are many options out there such as E*TRADE, TD Ameritrade, Charles Schwab, and many more. The choice is up to you, each bank has their own commission fees for different investment types, some have free commission when you buy certain ETFs (I will discuss in another post what these are), options trading contract prices (also in another post), you get the gist. Now to talk about a few accounts that you could use to trade in and what the benefits are.

Lets go over the three types of IRAs first, an IRA is an Individual Retirement Account. These types of accounts allow an individual to start saving for retirement with tax-free growth, on a tax-deffered basis. The three types of IRAs are Traditional, Roth, and Rollover, each has their own advantages.

Traditional IRA, you make contributions with money that you are going to be able to deduct on your tax return and any earnings that can potentially grow tax-deffered, until you decide to withdraw them during your retirement. 

Roth IRA (I have one), make your contributions with money that you have already paid the taxes on, and the money grows tax-free (providing you invest wisely and it grows). Then you have tax-free withdrawals in retirement, there are certain conditions that must be met.

Rollover IRA, this is a traditional IRA that is meant for money "rolled over" that was from a qualified retirement plan. They involve moving assets from an employer-sponsored plan, like a 401(k) or 403(b), into the IRA.

Now lets move onto a 401(k). 

A 401(k), is basically a retirement plan sponsored by your employer, wherever you may work. It allows to worker to save and invest pieces of their paycheck before taxes are taken out. The taxes are not paid until the money is taken out of the account. 

Another account that is useful is a JTWROS. 

JTWROS is Joint Tenants with Right of Survivorship, I like to call it Joint WROS. It is a type of brokerage account that is owned by at least two people, where all tenants have an equal right to the accounts assets and both are afforded survivorship rights in the event that a death occurs of another account holder.

You then have your basic checking and savings, to pay bills. I don't personally have a savings account run through any firm, my "saving" money goes straight to investments so I can make more off of it, instead of getting a small amount of interest sitting in a regular savings account. I would rather make 12% per year return my money than hardly 1% in a regular savings account.

The next post will be a surprise. Going to start your monday off with some food for thought.

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Chris Barto