4 Investment Accounts You Need to Have

What investment accounts are available for me?  What are the tax consequences of investing?  Planning your investments to build a retirement fund can be a dizzying prospect. The various questions, options, details, accounts, and amounts are enough to make anyone’s head spin. It is important to work with an investment coach that can understand your specific needs.

Below are a few basics and suggestions on some options available to most people.

1. Fulfill Your Company’s Match Program: If you work for an employer that has a retirement plan option, this is a must.  Most companies, even small companies, offer some sort of retirement account.  Smaller companies usually have simple IRA’s or SEP IRA’s, while larger companies usually have 401k’s.  There is a high likelihood that your company has a match program as part of their plan.  This means that for each contribution you make into your account, the company will match it up to a certain amount.  So match programs offer an instant 100% return on the money invested.   Before you invest anywhere else, make sure you are investing enough in your work retirement plan to get your full match.

Warning!  If you don’t plan on working for the company long term, make sure you check out the vesting schedule.  A lot of company retirement plans don’t give you full access to the employer contributions unless you work there for a 3 to 5 years.

2. IRA to the Max: An IRA is an individual retirement account that can be opened by anyone seeking to invest.  Investing in an IRA usually gives you more investment choices and flexibility than is offered in many 401k plans.   Also, you have the Roth option.  There has been a long standing battle between the Traditional IRA’s and the Roth IRA’s. When it comes to your retirement planning, your Roth IRA should win this battle in most cases. There are a few different reasons why you should make this move. Investing in a Roth allows you to pay taxes on your income now, and avoid the higher tax rate as it grows in your retirement.  The total taxes paid with a Roth IRA from opening of account to death and beyond are almost always less than with a Traditional IRA.

Who’s eligible?  Even if you have a retirement plan at work you are eligible to contribute to a Roth IRA.

Another thing to consider if you are married is opening a Roth IRA for your spouse.  Even if they are not working you can contribute to their Roth IRA and max it out as well.

3. Open Taxable (Non-Qualified) Accounts: If you have maxed out your company plan and an IRA for your and your spouse, congratulations, you are doing very well in the retirement planning side of things.  But what if you still want to put more money away?  There are still options.   You can still invest more money in a non-qualified account.  If you are married this would be a joint account, and for the singles it is a personal account. There are a few advantages and disadvantages of this type of account.  This is not a tax sheltered account, so there is no taxable advantage.

One big advantage.  There is no tax penalty or fee for taking the money out at any age for any reason.  For that reason a lot of people use this account as an emergency fund, or in any case where they want extra flexibility.

4. Education Planning:  If you have kids, you need to think about saving money for their future, especially their college expenses.  There are Education Savings Accounts, and other ways and means of doing this that are advantageous for tax purposes.

There is a lot of things to know, and I haven’t even gotten into life insurance and that side of the retirement planning.   Like I mentioned before, there is a reason that no one has created a perfect plan that fits everyone. Depending on your personal income, you might not be eligible for certain accounts, like a Roth IRA.  But, for most people, these four steps are a great place to start.

By Jimmy Hancock

College Savings Piggy Bank. Digital image. Flickr. N.p., n.d. Web. 27 June 2017.

The Best Way to Save for Your Child’s Education Costs

college cost“According to the College Board, the average cost of tuition and fees for the 2015–2016 school year was $32,405 at private colleges, $9,410 for state residents at public colleges, and $23,893 for out-of-state residents attending public universities.” 1

If you are looking into opening up an account for your child to help save some money for their college expenses you have come to the right place.  There are 2 main accounts you can use to reach your goal.   I will go over both of them at a basic level and explain some pros and cons of each.

But first I wanted to point out the similarities of both accounts and the advantages of using either one of them to bolster your saving for a college fund.  Either of these accounts would be better than just opening up a savings account at a bank because of the potential growth and the tax advantages.

Both plans offer the same federal tax advantages.  The advantage is similar to a Roth account in that you get the qualified distributions tax free when you take them out.   The money must be used to pay for qualified education expenses; if it is not, then taxes are charged and a 10% penalty takes effect.   If your child decides not to go to college you can roll the money over to another child or another family member.



Coverdell Education Savings Account (ESA)

A Coverdell Education Savings Account is another way for you to save for education expenses with its main selling point being the opportunity to invest how you like.


  • They are not just offered by the states, but they can be opened up by most investment companies.
  • You can choose how you want your money to be invested and are not limited in this.
  • You can use the money not only for continuing education, but also for K-12 expenses.


  • Has a $2000 per child contribution limit per year.
  • You cannot contribute if your income is over $220,000 (married filing jointly) 3.
  • Must contribute only before the child turns 18.


529 Plan

A 529 plan is a state specific plan that allows for you and other family members to contribute to a college fund with no contribution limits.


  • You can contribute as much as you would like each year
  • There is no income limits for being able to contribute.
  • The State may also offer specific state tax deductions.  Idaho does.
  • Can be opened for anyone at any age.


  • Very few investment company options that are selected by the state
  • Limit to the type of investments you can have
  • Cannot use your money for K-12 education expenses.
  • Must pay a gift tax if you contribute over $28,000 in one year (married filing jointly)

After looking at both types, we can see some advantages to both.   Which one you choose depends on your income, your family, and your investing preferences.  If you are not planning on investing more than $2000 per year per child and your income qualifies, then it would probably be advantageous to open up an Education Savings Account.  With this you will have the freedom to invest in a prudently diversified investment portfolio that you wouldn’t be able to find with a 529 plan.

We offer Education Savings Accounts, or could lead in the right direction at getting set up with a 529 plan.

By Jimmy Hancock


1.CollegeData. “Whats the Pricetag for a College Education.” Collegedata.com. N.p., 2016. Web. 12 Apr. 2016.

2. Hurley, Joseph. “Coverdell Esa Versus 529 Plan.” Savingforcollege.com. Saving For College LLC, 12 Mar. 2013. Web. 06 Oct. 2014. <http://www.savingforcollege.com/articles/coverdell-ESA-versus-529-Plan>.

3. “Common 529 Questions.” – College Savings & Prepaid Tuition Plans. CSPN, 2010. Web. 06 Oct. 2014. <http://www.collegesavings.org/commonQuestions.aspx>.

4. IRS. “Publication 970 (2013), Tax Benefits for Education.” Publication 970 (2013), Tax Benefits for Education. IRS, n.d. Web. 06 Oct. 2014. <http://www.irs.gov/publications/p970/ch07.html>.