If you want to grow your wealth, it’s paramount to start with the right investments.
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From retirement accounts to individual stocks, some investment options stand out for their popularity and performance. However, according to Christopher Stroup, CFP and owner of Silicon Beach Financial, whether you’re just getting started or looking to diversify, these five tried-and-true vehicles can help you build a stronger financial future and are most important for the average person to have.
401(k) or Employer-Sponsored Retirement Plan
For those with access to a 401(k), this is one of the most important accounts for retirement savings. Stroup said, “It offers tax-deferred growth, and many employers provide matching contributions, which is essentially free money for your retirement.”
Maximizing contributions, especially to capture the full match, should be a priority for most individuals. If you aren’t doing this, you are basically leaving money on the table, which is something few can afford to do in this economy.
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Roth IRA
A Roth IRA is significant because it allows for tax-free growth and tax-free withdrawals in retirement, Stroup pointed out. “Since contributions are made with after-tax dollars, you don’t get an immediate tax break, but in exchange, you won’t pay taxes on your investment gains in retirement.”
He said this makes it an excellent choice for those who expect to be in a higher tax bracket later in life.
Brokerage Account
While retirement accounts offer tax advantages, a taxable brokerage account is important for more flexible investing — and it’s one way that many people own stocks. “It allows you to invest without the restrictions of retirement accounts — such as withdrawal age — giving you access to funds anytime,” Stroup said.
You’ll pay capital gains taxes on profits, but it offers a great way to build wealth for long-term goals or major purchases outside of retirement.
Pension
For those who are fortunate enough to have access to a pension, it can be an important source of guaranteed retirement income, Stroup said. While fewer employers offer pensions today, they are valuable because they provide a predictable income stream in retirement.
“This can reduce the reliance on personal savings. However, they often only apply to specific sectors (like government or union jobs),” he said.
High-Yield Savings Account (HYSA)
While not an investment account in the traditional sense, a HYSA plays an important role in protecting emergency savings and short-term funds. Stroup explained, “It offers a better interest rate than a regular savings account, helping your cash keep pace with inflation. For the average person, it’s essential to have liquid savings, and a HYSA is a solid option for short-term, low-risk holding of funds.”
The more of these types of investment accounts you can have and actively contribute to, the better, but even a few of the top contenders can help set you up for a solid retirement.
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: 5 Most Popular Types of Investments You Should Have
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