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Chapters

0:00 Introduction
2:10 The Three Main Types of Investment Accounts
2:53 Tax Deferred Account
5:58 Tax Sheltered Account
8:00 Retirement Savings Account
8:28 401k Account
10:00 401K Contribution Limit
10:43 RRSP ( Canada)
11:15 Employer Match Program FREE MONEY!!
13:00 5 Tips to Maximize your 401K
13:45 IRA Individual Retirement Account
16:30 Exceptions to Withdrawing Funds without 10% Penalty
17:45 Tax Sheltered Account - ROTH IRA
20:27 Tax Free Savings Account (TFSA) Canada!
22:20 Non Registered Trading Account
23:55 Step By Step Plan to Set Up Investment Accounts
27:50 Summary

In today's video we are continuing to build our foundation on personal finance and investing and we are going to break down the different types of investment accounts there are so you can decide which one is best for you.

This video is part of a series that I am doing to help people learn the basics of investing so that they can be better prepared to start their investment journey and work towards Financial Freedom.

Okay so let's jump into the different types of investment accounts you can look into

There are 3 main Buckets of Investment Accounts that we will go over in today's video:

1) Retirement Savings Account- which is called a Tax Deferred Account
2) Tax Sheltered Account-
3) Non Registered Account

A tax deferred account like a 401K or Traditional IRA or an RRSP in Canada, is an account that allows you to postpone paying taxes on funds that you contribute into that account and on the profits made within that account. These accounts were created by the government to help people save for retirement.

Now with a Tax Sheltered account, you do not get the benefit of reducing your tax bill, the money that you contribute into a Tax Sheltered account is after tax dollars. Meaning you have already paid your taxes on that money and you are now using the after tax money to invest with.

In the United States retirement accounts are broken up into two main types: Employer Sponsored and Individual.

An employer Sponsored account is one that you set up through your company. The most commonly known one is a 401K account, but there are other ones depending on who your employer is and what industry you are in.

COntribution Limits -

With most of these accounts, there is something called a maximum contribution limit that you need to be aware of.

For the year of 2021, the maximum contribution limit is $19,500 and if you are 50 and older you can have catch up contributions of $6,500 so a total of $26,000

What is a 401K Company Match?

Your Employer will give you ‘free money’ as a part of your compensation plan. Normally, your employer will have set rules and limits on how much they will match up to, for example maybe they will match up to 4%.

For example, let's say your company is doing a 4% match, if your weekly salary is $1,500 that means your employer would contribute up to a maximum of $60 each week. So if you were to contribute $60 each week into your 401K, your company would then also contribute $60 a week bringing your total to $120 each week.

The other major type of Retirement Account is the Individual Retirement Account, better known as an IRA. The IRA was designed so that if your employer doesn’t offer retirement plans, you can still get similar benefits to the 401K.

A traditional IRA acts like a 401K, so the contributions that you make to it are tax-deductible. However the maximum amount you can contribute to an IRA is $6000, or $7000 if you're 50 and over.

So a ROTH IRA is different from the IRA or 401K, because you are not deferring taxes with this account. WIth this account all the money you are contributing is After-Tax dollars.

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*This video is not sponsored. All opinions expressed are my own. I sometimes receive products for free from brands for consideration but will disclose when videos are sponsored and I am getting paid to talk about the brand/products mentioned. Thank you for support.