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Account options for long-term financial planning

First National Wealth Management

Account options for long-term financial planning

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Sara Baus
Personal Trust Officer

Are you trying to save up for the retirement of your dreams, or maybe even to start your own business? Whatever your reasons for investment planning, there are many different solutions to help you reach your goals.

The only problem is that these solutions can be confusing, as the world of investment accounts includes an alphabet soup of acronyms: IRA, SEP, SIMPLE, 401(k), HSA, 529, and the list goes on and on.

But finding the best investment account simply depends on your goals and financial circumstances. Here is a breakdown of the most common types of investment accounts primarily available for long-term planning:

Investment management agency (brokerage) account

Perhaps the simplest of all investment accounts is an investment management agency account, also known as a brokerage account. This type of account can be owned individually or jointly.

By opening a brokerage account, you can invest your money in a wide range of investments such as stocks, mutual funds, bonds, and exchange-traded funds.

Brokerage accounts are considered taxable because you will not receive a tax benefit either on the funding of the account or when taking a withdrawal, and all interest, dividends, and gains on investments are subject to taxes.

On the other hand, there are no limitations on when or how much you can invest or withdraw.

Retirement planning accounts: 401(k), 403(b), and 457 plans

The 401(k), 403(b), and 457 plans are those offered by employers to help their employees save for retirement, and many employers match their employees’ contributions each year up to a certain amount.

Your contributions to these plans will be “pre-tax,” meaning you will receive an up-front income tax break in the year you make contributions to the account.

However, any withdrawals from these accounts will be taxed as income at your income tax rate in the year you take the withdrawal.

For these retirement planning accounts, the IRS sets limits on the amount you can contribute each year — $20,500 in 2022 and $22,500 in 2023. Additionally, you will be charged a 10% penalty by the IRS if you take a withdrawal before age 59 ½, subject to certain exceptions.

The last thing to note with these accounts is that the IRS requires minimum annual withdrawals after age 72 (or 70 ½ if you reached that age by the end of 2019).

To learn more about how these accounts will impact your long-term retirement planning, try out our 401(k) calculators.

Retirement planning accounts: Individual retirement account (IRA)

An individual retirement account — more commonly known as an IRA — is another type of account designed for retirement planning and savings.

Like with the 401(k), 403(b), and 457 plans, your contributions to an IRA will be pre-tax, and withdrawals will be taxed at your income tax rate. The IRS allows you to contribute $6,000 to an IRA in 2022 ($7,000 if you are 50 or older) and $6,500 in 2023 ($7,500 if you are 50 or older).

Another similarity to the 401(k), 403(b), and 457 plans is that you will be penalized 10% for any withdrawals before the age of 59 ½, and you must take minimum annual withdrawals after age 72 (or 70 ½ if you reach that age by the end of 2019).

Keep in mind that this account is not a viable option if you are no longer working because you must have earned income in the year you make a contribution to an IRA.

Retirement planning accounts: Roth IRA

A Roth IRA is subject to the same contribution limits as a traditional IRA; however, Roth IRA contributions are made “post-tax,” so you will not receive an income tax break in the years you make contributions.

Because contributions are made with money that has already been subject to income tax, your withdrawals will be tax-free, and the IRS does not require minimum annual withdrawals at any age. These are the biggest advantages to investing in a Roth IRA.

However, there are income limits for those looking to contribute to a Roth IRA. In 2022, a person filing taxes as single or head of household must have modified adjusted gross income (MAGI) below $144,000 ($153,000 in 2023), and married couples filing their taxes jointly must have MAGI below $204,000 ($218,000 in 2023).

As with a traditional IRA, you cannot contribute to a Roth IRA unless you have earned income in a given year, and there is still an early withdrawal penalty of 10% before age 59 ½.


When it comes to building your financial plan, there’s no need to stop at just one account; two, three, or all of these options could add tremendous value to your investment portfolio! If you’d like help determining which investment accounts are right for you, send us a note.

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