Account Types 101
By Anne Kiwasko on March 3, 2025
When it comes to building wealth, selecting the right investment accounts is crucial. The various types
of investment accounts provide different benefits to assist individuals in achieving their financial goals.
Understanding the different account types will help you build, grow, enjoy, and give.
Types of Investment Accounts
Taxable
Brokerage Account
Brokerage accounts can be used to buy and sell stocks, bonds, mutual funds, ETFs, and other securities. The gains may be subject to capital gain taxes. The accounts can act as cash management accounts, which come with debit cards, check writing, and direct deposit. The cash in a brokerage account may earn higher interest than traditional savings or checking
accounts.
Margin Account
Margin accounts are a type of brokerage account that allows you to borrow money from the account to invest.
Tax Advantaged
Individual Retirement Account
An Individual Retirement Account (or IRA) is a personal retirement account that offers tax advantages. There are different types of
retirement accounts –
Traditional IRA: Contributions are tax-deferred, and withdrawals are taxed at retirement.
Roth IRA: Contributions are made with after-tax dollars, but withdrawals are tax-free in retirement.
Inherited or Beneficiary IRA
An Inherited IRA is an individual retirement account that is inherited by a beneficiary after the original account holder’s passing. It allows the beneficiary to continue benefiting from the tax advantages of an IRA while following specific rules
regarding distributions.
401(k), 457, 401(b), 403(b), and other Employer- Sponsored Accounts
These accounts are often employers as retirement savings plans
Other
RMDs
RMD stands for Required Minimum Distributions. RMDs are the minimum amount that individuals must withdraw from certain retirement accounts once they reach a certain age. Roth IRAs do not require RMDs. Typically, you can delay RMDs from a 401(k) if you are still working. Failing to take your RMD will result in a penalty.
