How to Get Started with an Investment Service in Denver
Since the dawn of financial times, people have invested their money. Getting your money to make money for you remains a key part of how the financial world turns. But there is incredible complexity in the Stock Exchanges. And there are thousands of choices for investments. Also, each one impacts your taxes. So, getting started with an investment service in Denver requires some research.
What is an Investment?
What does the term “investment” really mean? An investment is an asset you purchase with the intention that it increases in value or generates income in the future. Simple enough.
An investment service in Denver helps you secure an investment like stocks, bonds, ETFs, or mutual funds. Also, some people invest in collectibles or property.
To purchase one of the assets as an investment, you need a vehicle. A vehicle is an investment account you open. Then you deposit funds into it and use that vehicle to purchase the assets you want. Investment vehicle categories include qualified (like retirement accounts) and non-qualified accounts.
Options for Investment Vehicles
Each investment vehicle has both benefits and limitations. Of course, this is a general overview and not an exhaustive list. Also, your financial situation is unique, so consult with an investment service in Denver for specific advice.
Individual Retirement Accounts (IRA)
Most people are familiar with IRAs. There are different IRA types with pros and cons, depending on your specific goals and assets.
- Benefits – Traditional IRAs are tax-deferred, so your pay taxes on them only when you take your money out. Also, any contributions reduce your taxable income the year you deposit them. The hope is that your income, and therefore taxes, are higher when you contribute than when you withdraw.
- Limitations – Contribution limits set how much you can contribute each year. You usually need to have employment income. Also, IRAs are subject to a 10% penalty if you withdraw any funds before you are 59 ½ years old. The Required Minimum Distributions (RMDs) mean you must withdraw a certain amount every year once you turn 72.
- Benefits – You pay the taxes on the contributions but get tax-free distributions without Required Minimum Distributions (RMDs) when you are 72.
- Limitations – Contribution limits depend on your adjusted gross income.
401(k), 403(b), and 457 Plans
These types of plans are the most common. They are usually sponsored through your work.
- Benefits – Work sponsored plans have higher contribution limits than IRAs, and often employers match a percentage of contributions.
- Limitations – The employer matching has a schedule for vesting, and your employer likely limits your choice of investments.
Individual /Non-Qualified Account
- Benefits – A non-qualified account has no contribution limits and no limit on distributions.
- Limitations – You pay taxes when assets sell, even within the account without a withdrawal. You pay capital gains taxes depending on how long you hold the assets.
- Benefits – Trust accounts decide how to settle your estate.
- Limitations – You need a Trust Agreement to open a Trust Account. Consult with an investment service in Denver for more information.
These are only a few investment vehicles to help you get started with an investment service in Denver. Whatever your current wealth or investment risk profile, there is a strategy suited for your unique situation. Reach out to learn more or discover more options.