We want to share a quick tip about “types of accounts” and “types of investments”.
People often get confused by account types and investment types. Stocks, mutual funds, IRAs, 529 Plans, bonds, brokerage, HSAs, trusts, annuities- these sometimes all get lumped together as different investment types. But the things I just mentioned are actually some ACCOUNT types and some are INVESTMENT types. In some cases, they can be both at the same time!
IRAs, 401(k), Roth IRA, Thrift Savings Plan (TSP), 529 Plan, Trusts, are all types of ACCOUNTS. It just means how it is categorized with the IRS and how it is taxed. While stocks, mutual funds, bonds, annuities, etc., are all types of INVESTMENTS that can be held within an account.
If you put money into an account, it does not automatically mean your money is invested. With many types of accounts, the money that goes is put into some kind of default investment, which is often just cash in the money market, meaning it is not invested for long-term growth.
You need to make sure when you put money in an account, you don’t just blindly put it in and forget about it. You’ll want to be sure it is being invested in a way that fits your financial goals and retirement goals. If you are not sure which investment funds to choose within your account, you should consider working with a financial advisor.
