Investing 101: An Introduction to Retirement Investment Accounts

If you have long-term or retirement investment goals, you may be thinking about investment strategies to match. Selecting a retirement investment account suited to your precise situation can help you reach those goals more effectively.  

As it turns out, preparing for retirement is hardly a one-size-fits-all process. For example:  

• Maybe you’re just getting started with a job that offers you 401(k) matching or other similar options. 
• Maybe you’ve been contributing to a 401(k), but now you’re wondering if you have other options.  
• Maybe your employer doesn’t offer these plans, or potentially you’re self-employed; either way, you need something you can manage yourself!  

When you’re beginning to explore investment options for retirement, it can seem like there are an incredible number of choices that need to be made upfront. It doesn’t help that the language surrounding investments often relies on complex industry jargon.  

It can also be difficult to motivate yourself to invest in a retirement fund because, for many younger investors, retirement seems too far away to feel relevant. It’s tempting to just tell yourself you’ll start investing for retirement later in your career. 

To help push through procrastination and clear any confusion that might create a barrier to beginning investing, it’s helpful to start with accessible information. Let’s talk about the different retirement investment options that might be best for your specific goals and circumstances!  

An Overview of Popular Retirement Investment Accounts 

Retirement investment accounts are a specific type of financial product that allow you to put away money now so you can draw from them after you reach retirement age.  

There are numerous options when it comes to retirement investment accounts. Options include 401(k)s, IRAs, and other similar financial products (including solo 401(k)s or different IRAs, such as Roth IRAs, SEP IRAs, or SIMPLE IRAs.)  

Selecting the best retirement plan for you depends on many factors – ones that may change considerably over your active investing years.  

Here, we’ll provide general information about two of the most popular retirement investment accounts:  

• A 401(k) is a popular retirement savings plan many employers offer. You may be contributing to it directly from your paycheck if you have one. In addition, many companies will match your contributions to a 401(k) – which makes contributing enough to earn that match a good focus, if investing for retirement is one of your goals.  
• IRAs: IRAs, or individual retirement accounts, are specific types of savings accounts that individuals can use to invest in the long-term. They often come with specific tax advantages and benefits that may encourage retirement savings. With some IRAs, you might contribute with pre-tax money; others might require post-tax contributions. One type of IRA, Roth IRAs, may offer individuals more control or flexibility than a 401(k) might – making some IRAs good options for consideration, whether a person has an employer-sponsored retirement plan or not.  

If you’re interested in leveraging investments for non-retirement purposes, A taxable investment account may represent an excellent way to set up investments supporting shorter-term goals. (We’ll discuss these options further in another Investing 101 installment.)  

Need help navigating the world of alternative retirement investment accounts? Your financial advisor can help you determine which account may be suited to your needs. 

Getting Started with Retirement Investment Accounts

Now that we’ve discussed a couple of the more popular retirement investment account options, let’s talk about how you can prepare for investing.  

A good first step might be to get in touch with a financial advisor you trust. This is especially the case if you’re self-employed or if you’re thinking about retirement investments beyond an employer-sponsored 401(k). A financial advisor can help you select financial products appropriate for your needs and help you streamline the complex startup processes.  

Once you’ve found the right financial advisor for you and you’re ready to start investing, the following practical steps should help you get started:  

1. If you’re interested in starting your investment journey with a one-time lump-sum investment, look at what you have in your accounts right now. Think about your upcoming short-term financial needs and any sums of money you prefer to keep tucked in an accessible short-term account (e.g., an emergency or rainy-day fund). After that’s accounted for, is there an amount of money you’d feel comfortable investing in a medium- or long-term account?  

2. Next, look at your monthly cash flow. What seems like a reasonable amount to start investing every month? Is there a sum you’d be comfortable committing to, month in and month out? Of course, you can always alter this after you begin investing, but doing your research upfront to reach a consensus will save you stress later.  

3. Finally, check with your financial advisor to see your automation options. If you can automate your monthly contributions into an investment account, that will make your investment journey that much easier!  

With your goals before you and excellent working knowledge of your investment options, you’ve done most of the heavy lifting already. All that’s left is to reach out to a trusted financial advisor to start investing. 

At Commas, we know that taking steps towards your financial goals can be both exhilarating and stressful. It’s our goal to take the complexity out of investing by giving you the information you need to make strategic choices. We’re also ready to meet you with accessible, friendly advice every step of the way. Reach out to our team today to learn more about the support we’re ready to offer. 

Commas is a wholly-owned subsidiary of Truepoint Inc., a fee-only Registered Investment Adviser (RIA). Registration as an adviser does not connote a specific level of skill or training. More detail, including forms ADV Part 2A and Form CRS filed with the SEC, can be found at www.commas.devphase.io. Neither the information, nor any opinion expressed, is to be construed as personalized investment, tax or legal advice.