types of investment accounts

Types Of Investment Accounts for 2024

There are several types of investment accounts, each with a different purpose. Some are perfect for anyone looking to save money for retirement or buying a new house, while others are designed to help you plan for your child’s college expenses. Knowing the specifics of each type of investment account is important when determining which best suits your goals.

Types of investment Accounts vs. Savings Accounts

Different types of investment accounts and savings accounts are frequently intertwined when discussing money management. While there are some commonalities, they each have a different purpose. Here are a few things to know when considering each:

  • Most investment accounts allow you to take on more risk than savings accounts.
  • Savings accounts offer a fixed return on your money.
  • Investment accounts are better suited for long-term goals.

Best types of investment accounts for 2024

Below, we’ve broken down each type of investment account so you can better understand its individual goal and who is eligible. 

Brokerage accounts

Brokerage accounts are non-retirement accounts that provide investors with various investment choices. These include individual stocks, bonds, mutual funds, and exchange-traded funds (ETFs). 

Standard brokerage accounts are taxable, which means they don’t have the same tax advantages as many retirement accounts. When you open a brokerage account, you’re usually given a couple of choices: You can set up an individual or joint brokerage account.

  • Individual brokerage account: An individual brokerage account is opened by a single person. This person will be responsible for any capital gains taxes due on the account.
  • Joint brokerage account: Joint brokerage accounts are owned by multiple people, and both are responsible for the taxes due on the account. While married spouses frequently open joint accounts, they can also be opened by two or more non-related individuals.

In addition to individual or joint brokerage accounts, you can set up a cash or margin account. 

Cash account

Most people think about cash accounts when they imagine an investment account. You open the account, deposit funds, and then make your investment choices.

Margin account

Margin accounts take investing a step further, potentially allowing you to build wealth faster. They allow you to take out margin loans with your broker to make even larger investments. They also allow you to short a company’s stock, which means you believe the stock price will decline instead of gain. 

Investing on margin comes with added risk. If your investment loses money, you could receive a margin call, which means you need to deposit additional funds to cover your losses. 

Who’s eligible for a brokerage account? You must be a legal adult, 18 years or older, and have a social security or Tax ID number to open a brokerage account. 

Employer-sponsored retirement accounts

Different types of retirement accounts.
401k ira roth on pieces of paper. Retirement planning.

Employer-sponsored retirement plans are a common benefit that many companies offer their employees. They help you save for retirement with unique tax advantages. Plus, many employers will even match your contributions up to a certain percentage or dollar amount. Typically, these retirement accounts come in two different forms.

  • Traditional account: These accounts are tax-deferred, which means you can reduce your tax liability today, but you’ll pay taxes on investment gains when you withdraw the money in retirement.
  • Roth account: These accounts don’t provide any tax benefit today, but when you retire, you can withdraw the gains tax-free.

Depending on your employer, several types of employer-sponsored retirement plans exist. The most common include: 


This is a typical plan type for private-sector companies. If you have a 401(k) plan, your employer is the plan sponsor and will select the different investment choices. This could be mutual funds, company stock, or annuities. 

For companies that match their employee contributions, it’s essential to understand that those contributions might not be yours immediately. Some companies use a vesting period, which means you need to stay employed with the company for some time before the contributions actually become yours.

How much can you contribute: In 2024, you can contribute up to $23,000 to a 401(k) plan. If you’re 50 years or older, you can contribute an extra $7,000 in catch-up contributions.

Who is eligible for a 401(k)? The employer determines Eligibility for a 401(k). Typically, it’s open to full-time employees who have been with the company for a predetermined number of months or years.


This is a frequent retirement plan for non-profit companies, including charities, churches, and universities. Similar to a 401(k), the investment choices will be determined by your employer but typically include mutual funds or annuities.

How much can you contribute: In 2024, you can contribute $23,000 to a 403(b). These also include catch-up contributions of $7,000 for anyone 50 years or older.

Who is eligible for a 403(b): Similar to a 401(k), the employer will determine who is eligible to participate in a 403(b) plan.

Individual and self-employed retirement accounts

Another way to invest in retirement is to use an Individual Retirement Account (IRA). Similar to employer-sponsored plans, IRAs offer tax advantages. There are several different types of IRA accounts, each operating differently. 

Traditional IRA

Investing in a traditional IRA is a great way to save for retirement and reduce your taxable income today. Depending on whether you or your spouse have access to an employer-sponsored retirement account, you may be able to claim a deduction for some or all of your contributions when filing your taxes.

With a traditional IRA, your contributions grow tax-deferred until you reach retirement and start making withdrawals. At that point, you will pay taxes on the distributions based on your income tax bracket.

Who is eligible for a traditional IRA: Anyone with earned income.

Contributions limits: In 2024, you can contribute up to $7,000. If you’re over 50 years old, you can make an additional $1,000 contribution for a total of $8,000 per year.

Roth IRA

Similar to a Roth 401(k), contributions to a Roth IRA are not tax deductible today, but the gains can be withdrawn tax-free in retirement. While some retirement accounts will require minimum distributions each year, you can continue contributing to Roth IRA accounts as long as you have earned income. 

Who is eligible for a Roth IRA account? While there are no income limits for investing in a Traditional IRA, there are for a Roth IRA. In 2024, single filers with a Modified Adjusted Gross Income (MAGI) greater than $161,000 will be ineligible. Married couples become ineligible once their MAGA exceeds $240,000.

Contribution limit: If you’re under 50, you can contribute up to $7,000 in 2024. Anyone over 50 can contribute an extra $1,000, for a total contribution of $8,000.


Simplified Employee Pension IRAs (SEP IRAs) are used by small businesses and self-employed individuals to save for retirement. Similar to traditional IRAs, contributions are tax deductible and will grow tax-deferred until you retire. 

Typically, SEP IRAs are best for self-employed or small business owners with no employees. This is because contributions are required to be equal. That means if you have employees, you’d need to make the same contribution to them as you would to yourself. 

Who is eligible for a SEP IRA? If a plan is offered, it must be available to all employees at least 21 years old, who have worked for the employer in three out of the past five years, and earned at least $750. Employers can choose to use fewer requirements, but not more.

Contribution limits: Contributions can’t exceed 25% of compensation or $69,000 in 2024, whichever is less. Catch-up contributions are not available.

Education accounts 

One of the easiest ways to pay for education expenses is through one of two different education accounts—a 529 plan or an Education Savings Account. Once only available to help pay for college expenses like tuition, books, and room and board, these accounts can now be used for any education expenses starting in kindergarten. 

Most states offer their own 529 savings plans, but they can be used nationwide. Plus, depending on where you live, your state might offer a tax deduction for contributions made into the account, and when it’s time to make distributions, these will be tax-free.

One significant benefit of a 529 account is that if one child decides not to go to college or there is money left over after graduation, the balance can be rolled over to another child. 

Who is eligible: Anyone over 18 can open a 529 account for themselves or a child. To open a Coverdell Education Savings Account, your annual income must be less than $110,000 ($220,000 if you are married).

Contribution limits: In 2024, the maximum contribution to a Coverdell Education Savings Account is $2,000. For a 529 account, the maximum aggregate contribution limit is set by each individual state. This will range from $235,000 for someone living in Georgia or Mississippi to $529,000 for those living in California. It’s also important to know that annual contributions over $18,000 will likely trigger a gift tax.

Health savings accounts

A health savings account (HSA) is a tax-advantaged account that can be used to pay for qualifying medical expenses. That means copays, dental care, eye care, prescriptions, etc. Before signing up for an HSA, you must have an eligible high-deductible health insurance plan. 

Contributions to your HSA are tax-deductible. When it’s time to use the funds in your account, you can withdraw them tax-free. The best part about HSAs is that there is no time limit on when the funds must be used. That means you can keep saving, letting the account grow for later in life when healthcare expenses tend to increase.

If you use the money in an HSA for non-medical reasons, you will be subject to a 20% penalty. However, once you reach age 65, the penalty disappears.

Who is eligible for a health savings account? To be eligible for an HSA, you must have an HSA-eligible health insurance plan. Additionally, you can’t be enrolled in Medicare or be claimed as a dependent on someone else tax return. 

Contribution limits: The 2024 HSA contribution limits are $4,150 for individuals and $8,300 for families.

Finding the best type of investment account for you

Understanding the different types of investment accounts and their goals can help you make a more informed decision on where to invest your money. 

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