by Chelsea Springli 
A common misconception is that investing is for people with a lot of money. Let’s put that rumor to rest, shall we? Investing is just a way to grow your wealth over time. In other words, investing is for beginners too! Of course, your investment plans will depend on your life situation like how much you can contribute, what your savings goals are, how much you currently have saved and more. If you want to start investing to save for your retirement, here’s some basic info to help you start.
What is Investing?
Investing is the process of putting money into assets with the goal of growing your wealth over time through appreciation, income, or both. Investments are things like stocks, bonds, and mutual funds.
Types of Investment Accounts
Different types of investment accounts come with various perks and downsides. Before choosing which options you want to invest in, make sure you understand the potential for risk or reward and the tax implications. There isn’t a right or wrong way to choose which accounts to use. It simply depends on your goals, your risk tolerance, and your tax situation.
Stocks and Bonds
An individual stock is like buying a little piece of a business. Your profits or losses depend on how the business is doing. If it’s doing really well it can lead to big gains, but it could also lead to big losses too depending on the stock market.
Bonds are different. Instead of buying into a business, a bond allows investors to loan money to an entity in exchange for interest payments over time. Stocks fluctuate more often while bonds are typically more stable.
IRAs
IRAs (Individual Retirement Accounts) help you save money for retirement and benefit from tax advantages to help that money grow. An IRA is a personal savings account that consists of varying investments. It might include stocks, bonds, annuities, certificates, mutual funds or other types of investments. IRA CDs at Alltru are federally insured by the NCUA up to $250,000.
As you contribute money into your IRA, the taxes on that money are deferred, or delayed, until the funds are withdrawn. Depending on the type of IRA, sometimes the funds aren’t taxed at all. It’s important to keep in mind that IRAs are designed for retirement savings, so you could owe penalty charges if you withdraw IRA funds early.
Alltru offers three different types of IRAs to help you save for your retirement.
Traditional IRA
Investments in a traditional IRA are tax-deferred, so you won’t pay income taxes on your earnings until you withdraw funds.
Roth IRA
Investments in a Roth IRA are funded by after-tax dollars, but qualified withdrawals may be tax-free.
Coverdell Education IRA
A Coverdell Education IRA allows you to save money tax-free for your child’s education. You can put aside $2,000 per year per child. These funds can help pay for elementary, high school, or college education expenses.
Mutual Funds
Mutual funds are a portfolio that a group of people contribute money toward. They could consist of stocks, bonds, or other investments. Investors own shares of the fund and may benefit from investment growth and distributions, depending on the fund’s performance and structure. This is a popular choice for beginners because a professional manages the funds. You can choose funds that align with your risk tolerance and investment goals, while professional managers oversee the fund’s investments.
Retirement Planning: 401(k) and 403(b)
Employers and financial institutions can help you save for retirement with 401(k), 403(b), or other retirement plans. These plans allow people to contribute money from their paychecks to help save for retirement later in life. Many companies offer 401(k) plans to their employees.
Teachers, administrators, and other public-school employees may be eligible for 403(b) plans that offer tax-deferred savings growth and compounding.
Some employers may also offer SIMPLE IRAs or SEP IRAs as retirement savings options.
Each program is different, so learn the details of the offer before you make any decisions.
The Cost of Investing
Investing doesn’t have to be overwhelming. Any type of investment requires you to set money aside that you don’t plan to touch for years. Investments also come with the potential for loss. This is why many investors diversify their investments. That way, they have a combination of accounts invested in a variety of companies and asset types. Over time, investment earnings can compound, allowing your money to grow on both your original contributions and any gains generated along the way. While all investments carry risk, starting early and staying invested for the long term can help increase your retirement savings potential by the time you retire.
Ready to Start?
A financial advisor can help you create a personalized long-term savings plan that works for you. If you’re ready to take the next step with investment services, retirement planning, or wealth management, Alltru Credit Union can help.
