Like a fine wine, your investments should get better with age. And it’s important to find the right pairings. Once you’ve set a goal, it’s time to pick the right account to help you get there.
Retirement. Because working forever probably isn’t at the top of your to-do list. Here are some popular options:
Meet the “regular taxable brokerage account.” Lots of syllables, very few rules. It’s a catch-all account for money you’ll need before retirement — for a home down payment, to start a new biz, pay for a future wedding, you name it.
There are no contribution limits or penalties for withdrawing your money at any time. Or tax benefits. Uncle Sam wants a cut of your profits, and charges “capital gains tax” on any money you make from selling investments.
That’s what 529s are for. You can use these accounts to invest for anyone: yourself, your kids, a neighbor, whatever. Most states offer tax deductions or credits for contributions, and you generally won’t owe taxes on withdrawals — so long as the money’s used for qualified expenses, like tuition, books, and room and board.
One more big one: HSAs, aka health savings accounts. These are investment accounts where you contribute pre-tax money from your paycheck for future healthcare costs. Think: doc appointments, prescriptions, flu shots, acupuncture, etc. For 2020, single people under 55 can contribute up to $3,550. Families can invest up to $7,100.
HSAs aren’t for everyone. To qualify, you have to be enrolled in a high-deductible insurance plan. Oh, and if you use your HSA funds for happy hour instead of healthcare, you’ll pay a 20% penalty and taxes. On the bright side, unused funds roll over each year.
Part of being smart about your money is putting it in the right place. Let your goals be your guide, and choose an investment account with the benefits that can help you reach them.
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