Pat on the back, my friend.
You’ve got your consumer debt under control, your emergency fund is ready for the unexpected, and you even have extra money each month because you’ve been sticking to your budget. Great job! Now that you’re ready to start investing, let’s look at some of the accounts and information that may be useful to you as you get started.
Getting a Promotion or Changing Jobs
You may be reading about investing because your income has recently increased. If so, congratulations! Now is a great time to increase the amount of money you are putting towards investments each month. Upping your retirement/investment contributions is a good way to avoid “lifestyle creep” or “lifestyle inflation.” When your increased income is still new, it’s hard to miss the money you didn’t have before.
If you have recently changed jobs, don’t forget about the retirement account that you had with your former employer. Check out this video on what to do with your old plan.
Tax Deferred Accounts
Some of the most popular tax deferred accounts are 401(k), 403(b), 457, pension, and IRAs. If your employer offers any of these accounts, this should be the first (and possibly the easiest) stop on your investing journey. Be sure to take advantage of any match offered by your employer. The match can be conditional based on the percentage of your paycheck that you are contributing, so read the fine print and make sure you’re contributing enough to take full advantage of employer contributions.
There are many scenarios where an individual traditional IRA could be a good option for you. Traditional IRAs typically provide more versatility in investments than a 401K account, and contributions are still tax deductible up to a set amount. In many cases, an individual account like this can complement the plan offered by your employer.
Visit Your Local Bank
Your bank is also a powerful tool to help you manage your money. As always, stop by your local branch to ask questions and to make sure you have the best accounts to meet your needs.